Here are the top five things you need to know in financial markets on Wednesday, February 14:
1. Inflation and retail sales in focus
Markets are focused Wednesday on key data points scheduled for release at 8:30AM ET (13:30GMT).
Traders will be keeping a close eye on the consumer price index (CPI) for January as they look for indications of inflation stateside in order go gauge support for the Federal Reserve’s plans to gradually increase interest rates.
Market analysts expect consumer prices to rise 0.3%, faster than December’s 0.1% increase, while core inflation is forecast to inch up 0.2%, a touch slower than December when consumer prices recorded their largest increase in 11 months.
On a yearly base, core CPI is projected to climb 1.7%, slowing from the 1.8% rise seen a month ago. Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.
At the same time Wednesday, the Commerce Department will publish data on retail sales for January. The consensus forecast is that the report will show retail sales increased 0.2% last month, its fifth consecutive advance. Core sales are forecast to gain 0.5%.
Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.
2. Dollar hits 15-month low against the yen
The dollar hit a 15-month low against the yen on Wednesday amid mounting expectations the Bank of Japan will follow the Federal Reserve and the European Central Bank's examples in normalizing monetary policy despite recent comments to the contrary by the Japanese central bank.
That was also despite data that showed slower-than-expected growth in the Japanese economy. GDP data for the fourth quarter released on Wednesday showed that growth slowed to just 0.1% from the previous quarter, missing expectations for a reading of 0.2%. On an annualized basis, the expansion slowed to 0.5% compared to expectations for growth of 0.9% and prior quarter’s 2.2% advance.
While waiting for the U.S. CPI data, USD/JPY was off 0.38% at 107.40 by 5:38AM ET (10:38GMT), pulling off an intraday low of 106.84 hit overnight.
Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slipped 0.04% at 89.56, trading near a one-week low ahead of economic data due later.
3. Global stocks mostly higher ahead of U.S. CPI data
U.S. futures pointed to a higher open on Wednesday ahead of the publication of the inflation and retail sales data. At 5:40AM ET (10:40GMT), the blue-chip Dow futuresrose 118 points, or 0.48%, S&P 500 futures advanced 10 points, or 0.39%, while the Nasdaq 100 futures gained 28 points, or 0.42%.
Elsewhere, European bourses also gained as traders focused on GDP data out of Germany that showed annual growth of 2.2%, the strongest for the motor of the euro zone economy since 2011. The euro zone itself registered an annual expansion of 2.7%, in line with forecasts.
Earlier, Asian shares closed with mixed signs. China’s Shanghai Composite ended with gains of 0.5% as investors prepared for a holiday week celebrating Lunar New Year. Japan’s Nikkei 225 ended 0.4% lower after the growth figures, while the stronger yen put downward pressure on stocks.
4. Bitcoin gains on positive nod from South Korean government
Bitcoin and rival cryptocurrencies traded higher on Wednesday as South Korea’s government gave the strongest signal yet that it will allow cryptocurrency exchanges to keep operating in the country, a welcome development for traders who had feared an outright ban in one of the world’s biggest markets for digital assets.
Policy makers will focus on making cryptocurrency trading transparent rather than outlawing it altogether, Hong Nam-ki, minister of the Office for Government Policy Coordination, said in a video a posted on the presidential website. It was the government’s first coordinated response to the public uproar over a justice ministry proposal in December to shut digital-asset exchanges.
Bitcoin was trading at $8,797.5 by 5:42AM ET (10:42GMT) on the Bitfinex exchange, up 4.2%.
Ethereum, the world’s second largest cryptocurrency by market cap, was last up 3.7% at $860.93 on the Bitfinex exchange.
Meanwhile, Ripple's XRP token gained 3.4% to $1.00850 on the Poloniex exchange.
5. Oil prices head south on bets for U.S. crude inventory build
Oil prices traded lower on Wednesday as market participants looked ahead to official U.S. crude inventory data later in the session.
The U.S. Energy Information Administration will release its official weekly oil supplies report for the week ended February 9 at 10:30AM ET (15:30GMT).
After markets closed Tuesday, the American Petroleum Institute said that U.S. oil inventories rose by 3.94 million barrels last week, compared with analysts' expectations for a gain of 2.82 million barrels.
Oil prices finished lower on Tuesday after the International Energy Agency raised concerns about a ramp-up in output by non-OPEC producers.
The commodity has been on the backfoot recently as investors worried over soaring U.S. output that has hit record levels, adding to fears that it would dampen OPEC’s efforts to rid the market of excess supplies.