European benchmarks slipped on Tuesday while Asian shares mostly finished higher as investors eagerly awaited an update on U.S. consumer inflation, which could potentially impact the Federal Reserve's policy on interest rates. The CAC 40 in France slipped nearly 0.2% to 7,678.07, while Germany's DAX shed 0.3% to 16,982.64. In addition, Britain's FTSE 100 fell 0.2% to 7,562.00. Meanwhile, the future for the S&P 500 lost 0.3%, and the Dow Jones Industrial Average suffered a 0.2% decrease.
Over in Asia, Japan's benchmark Nikkei 225 experienced significant gains, adding 2.9% to close at 37,963.97, briefly surpassing 38,000 for the first time in 34 years. On the other hand, Australia's S&P/ASX 200 lost previous gains, edging 0.2% lower to 7,603.60. South Korea's Kospi, however, had a notable jump of 1.1% to 2,649.64. Notably, markets in China, Hong Kong, and Taiwan were closed due to the Lunar New Year holiday.
Japan's producer price index data showed a 0.2% increase from a year ago, yet remained stagnant month-on-month. This slight increase may alleviate pressure on the central bank to make changes to its ultra-lax monetary policy or raise its benchmark interest rate from minus 0.1%. According to Yeap Jun Rong, a market analyst at IG, the 'tame number may still suggest limited passthrough to consumer prices and may offer room for the Bank of Japan to keep to its wait-and-see approach for now.'
Investors are eagerly anticipating Tuesday's update on inflation in the United States, which economists predict will show a drop back below the 3% level. One concern in the market is the uncertainty surrounding the potential risks to the economy posed by loans and other holdings tied to commercial real estate on banks' balance sheets.
The cooling inflation has prompted the Federal Reserve to hint at multiple cuts to its main interest rate throughout the year. Such cuts usually stimulate financial markets and the economy while alleviating the pressure that has built up since the Fed raised its main interest rate to the highest level since 2001.
Initially, traders hoped for rate cuts to begin as early as March, but recent reports indicating the resilience of the U.S. economy and job market, along with comments from Fed officials, have caused delays in implementing the cuts. As a result, traders have pushed their forecasts for rate cuts to May or June.
In energy trading, benchmark U.S. crude saw a 27 cent increase to $77.19 a barrel in electronic trading on the New York Mercantile Exchange. The international standard, Brent crude, also rose 23 cents to $82.23 a barrel.
In currency trading, the U.S. dollar strengthened against the Japanese yen, rising from 149.34 yen to 149.67 yen. However, the euro weakened slightly, costing $1.0764 compared to the previous $1.0774.
Overall, markets are eagerly watching for updates on various economic indicators, such as inflation, as they help shape future monetary policy and influence investment decisions.
