Macro Roundup (Feb 1)

SHANGHAI, Feb 1 —This is a roundup of global macroeconomic news last night and what is expected today.

The dollar fell on Tuesday, giving up earlier gains, after data showed U.S. labor costs increased less than expected in the fourth quarter, and before the Federal Reserve is expected to hike rates by 25 basis points on Wednesday.

The Employment Cost Index, the broadest measure of labor costs, rose 1.0% last quarter. That was the smallest advance since the fourth quarter of 2021 and followed a 1.2% gain in the July-September period.

Still, it is not seen as likely to sway the U.S. central bank from some further rate hikes.

Other data on Tuesday also showed that house price growth slowed considerably in November, with a 9.2% increase in the month.

Fed funds futures traders are pricing for the Fed’s benchmark rate to peak at 4.91% in June, up from 4.33% now.

But investors are also bearish on the U.S. economy and see the Fed as having to cut rates back to 4.48% by December. This is despite Fed officials stressing they will need to keep rates in restrictive territory for a period of time in order to bring down inflation.

Stock futures slipped Tuesday evening as investors looked ahead to the Federal Reserve’s Wednesday meeting.

Futures tied to the Dow Jones Industrial Average shed 48 points or 0.14%. S&P 500 futures and Nasdaq Composite futures were down 0.20% and 0.37%, respectively.

The moves come after stocks jumped to end January on a strong note. The Dow Jones Industrial Average ended the day nearly 369 points higher, rising by 1.09%. The S&P 500 gained 1.46% to cap its best January performance since 2019. The tech-heavy Nasdaq Composite rose 1.67%, its best January performance in 22 years.

On Wednesday, the Federal Reserve will announce how much it is increasing interest rates in its latest effort to tame high inflation. Markets are expecting a 25 basis point, or 0.25 percentage point, bump from the central bank. On Tuesday, the employment cost index, a measure of wage increases, showed compensation rose 1% in the fourth quarter, less than the 1.1% estimate by Dow Jones.

Oil prices closed steady on Tuesday after recovering from a near three-week low, drawing support from a weakening dollar and on data showing that demand for U.S. crude and petroleum products rose in November.

The more active second-month Brent contract settled at $85.46 a barrel, up 96 cents or 1%, while the U.S. West Texas Intermediate crude futures settled at $78.87 a barrel, up 97 cents or 1.3%.

Gold prices on Tuesday were on track for their third straight monthly gain, helped by an overall weaker dollar and expectations around slower rate hikes from the U.S. Federal Reserve.

Spot gold was near its session-highs, up 0.23% to $1,928.23 per ounce by 4:30 p.m. ET. Bullion has gained 5.7% in January. U.S. gold futures gained 0.2% to $1,943.60.

European markets slid further Tuesday despite euro zone growth figures coming in ahead of estimates.

The pan-European Stoxx 600 index closed down 0.2%, with the majority of sectors and all major indexes ending in the red. For the month of January, the index saw a gain of 6.72%.