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The big story at the start, US retail inflation, as measured by the consumer price index, rose 2.9% year-on-year in December, faster than 2.7% in November. This was in line with expectations.
Meanwhile, the core CPI, which excludes volatile food and energy prices, rose 3.2%—below November's gain and consensus estimates of a 3.3% increase. The data reinforced expectations that there will be a pause in the rate cuts at the next meeting of the Federal Reserve at the end of January. The base case assumption for traders is now a rate cut in June.
Bond yields dropped on the back of a rally in treasuries. The yield on the 10-year dropped to 4.66%, down from close to 4.8% earlier in the week. The dollar remains elevated, with the dollar index still at over $109.
Equity markets gained sharply, with the Dow and S&P 500 rising 1.6% and 1.8%, respectively. The Nasdaq Composite gained 2.4%.
Israel, Hamas Agree To Ceasefire
In other international news, Qatar's prime minister has said that Israel and Hamas agreed to a ceasefire in Gaza starting on Sunday and a hostage and prisoner exchange after 15 months of war.
The pause would allow hostages held by Hamas and Israel to be released in phases. It would also let thousands of people displaced in Gaza to return to the war-ravaged region. Humanitarian aid would also be able to enter the region.
Brent crude prices headed higher and were at over $82 to the barrel last I checked. That's after the US Energy Information Administration reported an inventory dip of 2 million barrels a day for the second week of the year. That's double what was drawn in the first week and the higher decline in inventories resulted in an uptick in prices.
The longer-term outlook for oil remains depressed though. With the same organisation, the Energy Information Administration, anticipating that with production growth outpacing demand, crude prices will average $74 to a barrel this year and $66 to a barrel in 2026.
Q3 Earnings Today
Back home, earnings are going to be key today. The likes of Reliance Industries Ltd., Infosys Ltd., LTIMindtree Ltd. and Axis Bank Ltd. will be announcing results today. By the way, expect the rupee to gain further after yesterday's move higher. That's as some of the pressure from the rampant dollar eases.
In other news, the Reserve Bank of India has decided to conduct variable-rate repo auctions on a daily basis in order to boost banking system liquidity, according to a statement. The VRR auctions will be conducted between 10:00 a.m. and 10:30 a.m. every day and will be reversed the following day. This is because banking system liquidity was in a deficit of Rs 2.09 lakh crore as of Jan. 14.
In corporate news, global consulting firm KPMG, which is the advisor to the government for the stake sale in IDBI Bank, is set to complete its closing diligence. According to two people with direct knowledge of the matter, the consultant will likely finish the diligence process in a few weeks and submit its report. However, considering the timeline for this submission, the IDBI Bank sale process will likely conclude only in the next financial year.
The Supreme Court issued a warning to states on Wednesday, threatening to initiate a contempt action for their inaction over complaints of misleading ads against modern medicine. A division bench, led by Justice Abhay S Oka, remarked that the Delhi government's explanation that identifying offenders was challenging was "peculiar". The court also asked other states for the status reports for actions taken on the basis of complaints received.
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