Jerome Powell, chairman of the US Federal Reserve, at a news conference after the Federal Open Market Committee meeting in Washington, DC on December 18, 2024.
Al Drago | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open informs investors about everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Fed cautious on inflation and Trump policies
At their meeting in December, the US Federal Reserve officials have expressed concern that inflation will remain stubbornly above the central bank’s 2% target, and the possible impact of US President-elect Donald Trump’s policies. Consequently, officials would it is moving more slowly to reduce interest ratesthe minutes released on Wednesday showed.
US stocks shrugged off inflation concerns
American stocks fell in price small gain on Wednesday although it is 10-year Treasury yield touched by his own the most since April after the publication of the FED minutes. Asia-Pacific markets mostly traded lower on Thursday. Australia S&P/ASX 200 closed 0.24% lower as data showed in the country retail rose less than expected in November.
Asian central banks face a strong US dollar
Asian currencies such as the Chinese yuan, Japanese yen and Korean won have fallen against the US dollar since Trump won the presidential election in November. It represents a conundrum for Asian central banks: A weaker currency would boost exports but could increase imported inflation, complicating banks’ ability to guide domestic economic policy.
Fear of deflation in China
Consumer price inflation in China rose by 0.1% year-on-year in December, data the State Bureau of Statistics showed on Thursday. On a monthly basis, China’s CPI was unchanged, compared with a 0.6% decline in November. Persistently low consumer inflation in China indicates that China is struggling with weak domestic demand, fueling fears of deflation.
Argument over quantum computing
Nvidia CEO Jensen Huang said on Tuesday that the market entry of “very useful quantum computers” could it takes 15 to 30 yearswhich caused quantum computing stocks to fall on Wednesday. Alan Baratz, company director D-Wave Quantumwhose shares fell more than 30%, said Huang “dead wrong” — “we at D-Wave are commercial today,” Baratz told CNBC.
[PRO] Watch out for this Taiwanese chip supplier, says Bernstein
At CES, Nvidia announced a desktop supercomputer aimed at AI researchers and data scientists. The computer will feature Nvidia’s Grace Blackwell Superchip, which Nvidia will produce in collaboration with Taiwanese chip supplier. The supplier will see significant financial benefits from the partnership starting in 2026, Bernstein says.
Conclusion
On paper, the minutes from the Fed’s December meeting bring bad news for investors. Officials were concerned about inflation and the impact of Trump’s stated policies (although Trump was not specifically named).
“Almost all participants assessed that the risks to the inflation outlook have increased,” the minutes said. “Participants cited recent stronger-than-expected inflation readings and the likely effects of potential changes in trade and immigration policy.”
As a result, Fed officials see a slowdown in the pace of interest rate cuts going forward.
Rising risks to inflation, troubled policies for the economy and fewer rate cuts than expected: It’s a potent and bitter brew for investors to swallow. The yield on the 10-year Treasury note reached 4.730% during intraday trading, the highest since April.
Still, stocks largely shrugged off that warning to tick off Wednesday. The S&P 500 added 0.16% and Dow Jones Industrial Average increased by 0.25 percent. The Nasdaq Composite slipped 0.06% — technology stocks like Palantir, Advanced micro devices and Micro strategy had a rough day — but it’s still close to a flat line, not a sharp drop.
Investors seem to have already bought into the inflation warnings — the Fed’s latest dot plotwhich predicted just two cuts of a quarter of a point in 2025, had already rattled markets when it was released in December.
Fed Governor Christopher Waller also provided some remedy for investors. Speaking in Paris, he he said the stubbornness of inflation recently has been driven primarily by “imputed” prices such as housing services, while “observed” prices of other goods and services show disinflation.
Waller added that if economic conditions go his way, he will “support continuing to cut our benchmark rate in 2025.”
What is not as highly regarded is the US employment report for December due out on Friday. That could be the next catalyst for the markets.
— CNBC’s Jeff Cox, Sean Conlon and Pia Singh contributed to this report.
