Macro Roundup (Dec 15)

SHANGHAI, Dec 15 - This is a roundup of global macroeconomic news last night and what is expected today.

The U.S. dollar rose again on Tuesday after rebounding from a dip that nearly wiped out its gains from the day before as markets jostled with the different paths major central banks are choosing between fighting inflation or the economic drag of the pandemic.

The U.S. dollar index measuring the currency against major peers was up 0.2% at 96.5520 in afternoon trading in New York after having earlier given up much of its Monday gain of 0.3%.

The rebound came largely at the euro’s expense as markets digested another report of unexpectedly high U.S. inflation that could push American interest rates much higher and sooner than in Europe.

The dollar’s safe-haven appeal also improved as stock indexes fell in the United States and in Europe, and as oil dropped on a prediction that the spreading Omicron variant of the coronavirus will dent global demand.

The euro was down more than 0.2% at $1.1256, near a one-week low at 3:39 p.m. ET (2039 GMT).

The contrast between the monetary policies of the U.S. Federal Reserve and the European Central Bank is driving the euro-dollar exchange rate, said Ron Simpson, global currency analyst at Action Economics in Safety Harbor, Florida.

The Fed will update its policy on Wednesday and the ECB on Thursday.

U.S. stock futures were steady in overnight trading on Tuesday as investors readied for Wednesday’s highly anticipated Federal Reserve decision.

Dow futures rose 15 points. S&P 500 futures were flat and Nasdaq 100 futures rose 0.03%.

On Tuesday, the major averages slipped, exacerbated by selling in software names like Microsoft and Adobe. The Dow Jones Industrial Average lost 106 points. The S&P 500 fell 0.75%.

The technology-focused Nasdaq Composite was the relative underperformer, dipping 1.1% as Facebook-parent Meta Platforms, Amazon, Apple, Netflix and Google-parent Alphabet all closed lower.

Also hurting sentiment Tuesday was the hotter-than-expected inflation reading for November’s producer price index showing a year-over-year increase of 9.6%, the fastest pace on record. This was above the 9.2% expected by economists, according to Dow Jones. The index rose 0.8% month over month, above the 0.5% expected.

Oil futures prices dropped toward $73 a barrel on Tuesday after the International Energy Agency (IEA) said the Omicron coronavirus variant is set to dent global demand recovery.

U.S. data showing producer prices at 11-year highs reinforced market expectations of faster stimulus tapering by the Federal Reserve, which meets this week. This supported the dollar and weighed on oil, which typically move inversely.

Brent crude futures fell 69 cents, or 0.9%, to $73.70. U.S. West Texas Intermediate (WTI) crude futures settled down 56 cents, or 0.8%, at $70.73.

Gold fell more than 1% on Tuesday after a jump in U.S. producer prices fuelled expectations for sooner-than-expected interest rate hikes ahead of the Federal Reserve’s two-day meeting.

Spot gold fell 0.9% to $1,771.66 per ounce by 01:40 p.m. ET (1840 GMT). U.S. gold futures settled down 0.9% at $1,772.30.

U.S. producer prices increased more than expected in November as supply constraints persisted, supporting views that inflation could remain uncomfortably high for some time.

The pan-European Stoxx 600 closed down by 0.7% provisionally, having given back earlier gains of around 0.6%. Tech stocks dropped 2.1% to lead losses as most sectors and major bourses dipped into the red.

European stocks slipped Monday as traders reacted to developments regarding the omicron Covid variant. U.K. Prime Minister Boris Johnson confirmed that at least one patient infected with the new omicron variant of Covid-19 has died in the country.

Mainland China reported its first case of the omicron Covid variant Monday in the city of Tianjin, about a two hours’ drive from capital Beijing.

Investors are also focused this week on central bank action with the U.S. Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank all due to announce monetary policy decisions.