Investing.com - Stock markets in the US are set to be shuttered on Thursday after equities logged a muted close in the prior session. Minutes from the Federal Reserve's December meeting suggest that the central bank's staff is taking a cautious approach to further interest rate cuts this year as they eye the possible impact of the incoming Trump administration's tariff plans. Elsewhere, consumer prices in China barely rise in 2024 despite a raft of recent stimulus measures from Beijing, official data shows.
1. Stocks muted
US stocks were little changed on Wednesday as investors digested a fresh batch of labor market data and assessed a report regarding President-elect Donald Trump's sweeping tariff plans.
Traders were also given the chance to pour through minutes from the Federal Reserve's December policy gathering, when officials chose to slash interest rates but present a more cautious outlook for further reductions this year.
Benchmark US Treasury yields briefly touched their highest levels since April, partly reflecting the impact of a CNN report that Trump was considering using emergency economic powers to support his proposal to slap universal levies on allies and adversaries alike. Some economists have flagged that the move could reignite inflationary pressures.
At the end of the trading day, the S&P 500 had gained 9 points or 0.2%, the Nasdaq Composite had dipped by 11 points or 0.1%, and the Dow Jones Industrial Average had added 107 points or 0.3%. Equity markets in the US are set to be closed on Thursday in observance of the death of former US President Jimmy Carter.
2. Fed members "careful" ahead of Trump 2.0 - minutes
Trump’s plans for broad-based tariffs and mass deportations have led to uncertainty among Fed officials regarding the outlook for inflation, according to minutes from the central bank’s latest gathering.
Policymakers worried that a recent cooling in price gains may be impacted by the policy changes, adding that the process of inflation easing to the Fed’s eventual target of 2% “could take longer than previously anticipated.”
These fears, coupled with the Fed slashing interest rates by a percentage point in 2024, persuaded some members to opt for a “careful” approach to further reductions this year, the minutes said.
Following the release, bets that the Fed would choose to leave borrowing costs unchanged at its next couple of upcoming meetings were bolstered, with the first drawdown now not forecast until May at the earliest.
Markets are now looking ahead to the monthly US employment report on Friday, which could have further sway over the thinking of Fed staff. On Wednesday, private payrolls data for December slowed, although the weekly number of Americans filing for jobless benefits fell.
3. Chinese consumer prices barely rise in 2024
Consumer prices in China edged only slightly higher last year, as the world's second-largest economy grappled with sluggish domestic demand despite a series of government stimulus measures.
Beijing unveiled several policies to help support growth in late-2024, but ongoing ructions in China's housing market, debt and threats of renewed tensions with the US over tariffs have contributed to consumer uncertainty.
The country's full-year consumer price index inched up by just 0.2%, equalling the pace registered in 2023, according to data from the National Bureau of Statistics. The official target had been set at 3%.
In December, CPI expanded by 0.1% year-on-year, in line with estimates and softer than the prior month's level of 0.2%. Analysts at ING noted that the main drag on inflation in December came from food prices, which dropped to a six-month low.
On the business front, producer prices shrank 2.3% in December, slightly less than expectations for a 2.4% contraction, and improving marginally from the 2.5% drop seen in the prior month. Factory-gate prices have now been in deflationary territory for 27 consecutive months.
The ING analysts predicted that the upcoming Lunar New Year in China will help inflation rebound this month, but flagged that overall price growth is "expected to remain low in 2025."
4. Bitcoin slips
Bitcoin fell on Thursday, extending a run of steep losses as risk appetite was dented in part by the minutes from the Fed's latest meeting.
The world’s largest cryptocurrency has largely wiped out a new year rebound this week, tracking broader declines in risk-driven assets as traders braced for a slower pace of rate cuts in 2025.
By 03:25 ET (08:25 GMT), Bitcoin had dropped by 3.1% to $92,988.1.
5. Crude stable
Oil prices steadied Thursday after the prior session’s losses, in the wake of the release of large builds in fuel inventories in the US, the world's biggest oil user.
By 03:26 ET, the US crude futures (WTI) was broadly flat at $73.34 a barrel, while the Brent contract was mostly unchanged at $76.17 a barrel.
Both contracts fell more than 1% on Wednesday, dropping back from levels near the highest since mid-October as a stronger dollar and the bigger-than-expected rise in US fuel stockpiles weighed.
Gasoline stocks rose by 6.3 million barrels last week to 237.7 million barrels, the US Energy Information Administration said on Wednesday, ahead of the expected 1.5 million-barrel build.