By Jeffrey Smith

Investing.com — The US releases retail sales and producer price data for December that may or may not boost hopes of a Federal Reserve pivot. However, the Bank of Japan refuses to turn around, despite all bets that it will be forced to give up its cap on bond yields. The Bank of England is also under pressure to tighten after strong inflation data for December. Microsoft is expected to announce a round of job cuts, and PNC Financial and JB Hunt report earnings. Oil reaches its highest level in more than a month on forecasts that the global market will turn into a major supply shortage by the end of the year. Here’s what you need to know in the financial markets on Wednesday, January 18.

1. Retail sales, PPI to fuel Fed pivot story

The US releases data for December at 08:30 ET (13:30 GMT), in the latest test of US consumers’ ability to continue spending despite the economic slowdown.

Analysts expect a 0.8% decline in sales values, which would translate into a slightly smaller drop in sales volumes given the 0.1% fall in consumer prices last month.

There will also be inflation figures for December, where a decrease of 0.1% is expected. If confirmed, that would push the PPI to its lowest level in 18 months, adding to evidence that the expansion in profit margins that drove up inflation during the pandemic is now rapidly reversing.

2. There is no Japanese word for “pivot”

It kept its monetary policy unchanged despite expectations that it would loosen the cap on long-term bond yields.

Financial markets had been betting heavily on the BoJ abandoning its policy of yield curve control, and the decision led to a rapid reduction of speculative positions in the yen, whose floor rates make it the preferred funding currency for many interest-based investors. transactions.

The dollar rose as much as 2% against the in the wake of the BoJ’s decisions, but later gave up more than half of its gains to gain 0.9% by 06:15 ET. That suggests the market still wants to test the BoJ’s determination to defend a 0.5% upper limit to 10-year Japanese bond yields. The BoJ spent more than $260 billion in December to keep interest rates low and now owns more than half of the entire JGB market.

3. Stocks will open slightly higher than retail sales; Microsoft announces job cuts

US stock markets are expected to open marginally higher, but futures are showing little confidence ahead of the retail sales report.

At 6:15 a.m., they were up 22 points or less than 0.1%, while they were up 0.1% and up 0.2%. Major cash indices had a mixed day on Tuesday, with weak gains from Goldman Sachs (NYSE:) dragging the Dow down nearly 400 points.

Stocks likely to be in the spotlight later on include Microsoft (NASDAQ:), which reports suggest is likely to announce a round of job cuts later in the day. The Redmond-based giant reported its slowest sales growth in five years in the third quarter. Fourth quarter results are expected next week.

Income is due later from Karl Schwab (NYSE:), Prologis (NYSE:), PNC Financial (NYSE:) and JB Hunt (NASDAQ:), among others.

4. BoE under pressure to keep hiking after strong CPI data

The rise reached a seven-month high after the UK remained stubbornly above 10% in December, leaving the Bank of England under pressure to raise rates further.

Headline inflation remained at 10.5%, while food and services prices continued to rise sharply. The numbers confirmed anecdotal reports from the retail sector that suggested spending has remained strong despite continued cost-of-living pressures.

The share price, on the other hand, fell after a report from Bloomberg, which suggested that several policymakers at the European Central Bank want to slow the pace after its next meeting in February. Bank of France governor Francois Villeroy de Galhau warned that prospects for a 50 basis point hike in February are still intact.

5. Oil hits six-week high after IEA predicts shortage; API stocks due

The price of crude oil rose to its highest point in more than a month after the International Energy Agency predicted a sharp reversal in the balance between supply and demand over the course of the year on the back of improving Chinese demand.

The IEA expects a surplus of about 1 million barrels per day in the first quarter of the year, turning to a deficit of 1.6 million barrels per day in the third quarter, rising to 2.4 million barrels by the end of the year per day, despite record high global oil supplies.

At 6:30 am, futures were up 1.9% to $82.00 a barrel, while they were up 1.6% to $87.33 a barrel. Weekly data from the American Petroleum Institute on US inventories is expected at 4:30 PM ET.