Main U.S. indexes post modest gains; DJI out front, up ~0.4%
Energy leads S&P 500 sector gainers; healthcare weakest group
Euro STOXX 600 index gains ~0.5%
Dollar down; gold, crude, bitcoin rally
U.S. 10-Year Treasury yield falls to ~3.52%
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U.S. STOCKS DIGEST CPI, RALLY OFF EARLY LOWS (1014 EST/1514 GMT)
After initially falling, the main U.S. stock indexes have turned positive early on Thursday after further evidence of cooling inflation boosted bets that the Federal Reserve will slow the pace of its future interest rate hikes.
According to the CME's FedWatch Tool, there is now a 93% chance of a 25 basis point increase at the conclusion of the January 31-February 1 FOMC meeting. The probability of a 50 basis point increase now stands at about 7%. Just before the latest CPI data at 0830 EST, these chances stood at 77% and 23%.
Regarding the earlier inflation data, Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, said: "The fact that we have seen core inflation decelerate to 5.7% year-over-year, from 6% in November, reinforces the peak inflation argument. All of this is consistent with the Fed’s interpretation of the lagged impact of monetary policy and the cumulative effect of the tightening that they’ve already accomplished."
Lyngen added, "But I will note that it is an especially volatile period, which is not atypical for inflection points in market expectations and the broader macro outlook.”
Here is where markets stood around 1015 EST:
U.S. STOCK FUTURES HOLD MODEST GAINS AFTER ROUGHLY IN-LINE CPI (0900 EST/1400 GMT)
U.S. equity index futures are modestly higher in the wake of the release of the latest data on inflation. Meanwhile, Treasury yields and the dollar are under pressure.
The December consumer price index (CPI) month-over-month and year-over-year came in below expectations. Core readings were also cooler than estimates. Additionally, the latest read on jobless claims came in at 205k vs a 215k Reuters poll:
The data has increased the chance of a less aggressive rate hike by the Federal Reserve at the conclusion of the latest FOMC meeting on Wednesday. According to the CME's FedWatch Tool, the probability of a 25 basis point rate hike has now risen to 82% from around 77% just before the numbers were released. There is now about an 18% chance of a 50 basis point move down from about 23% from just before the data came out.
E-mini S&P 500 futures are around 0.6%. That's vs a gain of around 0.5% from just before the numbers were released.
A majority of S&P 500 sector SPDR ETFs are quoted higher in premarket trade although gains are slight. Energy is posting the biggest rise, up about 1%. Basic materials are taking the biggest hit, off just 0.4%.
Regarding the inflation data, Quincy Krosby, chief global strategist at LPL Financial, said: "This is difficult for the (stock) market. The market had been anticipating a cooler number, especially having those rents that are starting to come down show up a little bit in this report, but they haven't. The market has been desperate to cross over 4,000 into 4,100; this is going to make that difficult."
Here is a snapshot of where markets stood around 25 minutes after the data came out:
FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE