Last week, we saw a slew of US economic data that showed an economy and a jobs market that were stronger than expected. As a result, inflation expectations are rising, and expectations of more interest rate cuts from the US Federal Reserve are falling.
According to the US interest rate futures market, the probability of an interest rate cut in the March policy meeting which was 75% at the start of the week has dropped below 25%. As such, the stock market is on the defensive for now. Should the US inflation data (PPI and CPI) this week confirm the risk of rising inflation, investors’ sentiment is likely to be challenged further.