Stocks Rise for Second Day; Treasury Yields Drop

Stocks rose and benchmark Treasury yields retreated for a second day amid optimism the economy will continue to benefit from government support. The S&P 500 rose by 0.23% to 3,809.84 while Dow Jones was down 8.22 points (0.03%) to 31,060.47.

US Core Consumer-price Gauge Cooled Slightly From Prior Month

A key measure of prices paid by US consumers cooled in December from a month earlier as slack in the labor market and muted demand helped keep inflation pressures tame. The core consumer price index, which excludes volatile food and energy costs, increased 0.1% from the prior month after a 0.2% gain in November, a Labor Department report showed. Compared with a year earlier, the core CPI rose 1.6%.

US Business Starts Enjoyed Their Best Year Ever Amid Covid-19

The surge of US business formations in the back half of 2020 has been one of the pandemic’s many surprises. After cratering by 30% in the weeks following the March lockdowns, paperwork filed by prospective businesses started growing in June and finished the year ahead of 2019’s tally by almost a quarter, according to a US Census Bureau analysis of federal tax documents.

Lagarde Defends ECB Economic Outlook Even as Banks Cut Forecasts

The European Central Bank’s latest projections for economic growth in the euro area are still “very clearly plausible” despite the resurgent coronavirus and renewed lockdowns, President Christine Lagarde said. The ECB chief said that many of the uncertainties that previously clouded the outlook have now cleared, including U.S. elections, the Brexit trade deal with the UK, and the start of vaccinations. At the same time, she warned that monetary and fiscal support must continue.

Reinhart Frets World Faces Financial Crisis If Pandemic Lingers

World Bank Chief Economist Carmen Reinhart is worried that the protracted nature of the Covid-19 pandemic may overwhelm household and business balance sheets and develop into a financial crisis. “It’s a cumulative toll,” Reinhart said. This started and continues to be, first and foremost, a health crisis. But it has elements that have morphed into your classic balance sheet problems.

BOE Vows to Improve Its Public Explanation for US$1.2 Trillion QE

The Bank of England will improve the way it communicates about how it stimulates the economy through quantitative easing, a response to an internal report that found the method is poorly understood. A report from the BOE’s Independent Evaluation Office published found the central bank’s 900 billion-pound (US$1.2 trillion) program has been delivered “effectively” but there were “important knowledge gaps” in its technical understanding of the tool.

BOJ Is Said to Mull Downgrading View of Economy Amid Emergency

The Bank of Japan is likely to consider downgrading its economic assessment at a policy meeting next week following the declaration of a partial state of emergency to combat the latest virus wave, according to people familiar with the matter. BOJ officials say the bank needs to discuss its assessment as there is little doubt the latest emergency declaration will take a heavy toll on the economy, the people said.

Oil Rally Pauses With Fuel Buildup Dimming Tighter Crude Supply

Oil’s red-hot rally took a breather as a stronger dollar and rising refined products supplies offset shrinking US crude inventories, capping the price under a key technical indicator. Brent crude for March settlement fell US$0.52 to US$56.06 per barrel.

Source: Affin Hwang Research - 14 Jan 2021