Investors expect a decline in US consumer inflation

According to hedge fund strategists, investors are looking for signs of a potential peak in inflationary pressures, and if today’s data shows a decline in consumer prices, stock indices will show a strong rally. On the other hand, if the inflation data are worse than expected or there is a new acceleration of inflation, the stock market may see a strong sell-off.

The US Congress plans to allocate another $40 billion to Ukraine. The proposal for additional funding related to COVID-19, which some Democrats wanted to combine with emergency funding for Ukraine, will now be considered separately. On April 28, Biden asked Congress for $33 billion to support Ukraine, including more than $20 billion in military aid. The proposal was a dramatic escalation of US funding for the war with Russia.

Yesterday, US President Joe Biden said that the COVID-19 pandemic, combined with supply chain problems and Russia’s war with Ukraine, were to blame for the spike in inflation. The US government rushed trillions of COVID-19 bailouts and infrastructure spending into the economy.

Oil prices continue to fall as tough quarantine measures in Shanghai continue to raise demand concerns. US President Joe Biden stressed yesterday that as the inflation surge had driven up annual consumer prices by more than 8%, the US is releasing oil from its strategic oil reserves and pressuring companies to return record-high profits to consumers in the form of lower prices.

Asian markets traded lower yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.58%, Hong Kong’s Hang Seng (HK50) was down 1.84%, and Australia’s S&P/ASX 200 (AU200) fell by 0.98%. As the world’s second-largest economy remains under strict quarantine restrictions due to Covid-19, China’s growth prospects remain a challenge for global trade. China’s consumer price index increased to 2.1% y/y. Price growth for the month was 0.6%. In contrast, factory inflation declined from 8.3% to 8.0% y/y. The slowdown in PPI (factory inflation) was due to government measures to stabilize commodity prices and increase supply. On Tuesday, China’s state planner called for stabilization of energy prices and acceleration of oil and gas exploration and development. Beijing has planned daily coal production at 12.6 million tons this year and gives priority to energy security due to geopolitical uncertainty caused by Russia’s invasion of Ukraine.