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Priced for perfection in CPI

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Priced for perfection in CPI

A look at the day ahead in European and global markets by Tom Westbrook

Markets are anticipating the release of US inflation figures, hoping they will not prevent a rate cut next week.

None of the economists polled by Reuters see the core CPI for November rising above 0.3% and anything at that level or lower is unlikely to disrupt prices.

It’s the surprise that markets are pricing in 21 basis points of US easing next week that traders may want to pay attention to.

Even a core value of 0.3% would put the three-month annualized interest rate at around 3.6%, which is uncomfortably high. So a higher reading could put a pause on bets on a December rate cut and US stock indexes trading near record highs.

Trading in Asia was cautious, with the dollar easing against the yen and steady elsewhere and stocks remaining in a holding pattern. [MKTS/GLOB]

In one of their most forgiving statements in more than a decade, China’s leaders signaled Monday they are ready to deploy whatever stimulus measures are needed to counter the impact of expected U.S. trade tariffs. But after initial gains, markets have cooled and Chinese stocks have been largely flat.

The Canadian dollar is near a 4.5-year low as rising unemployment fueled expectations for a 50 basis point rate cut later on Wednesday.

German shares also caught their breath after shooting to record highs despite the bleak economic outlook. The benchmark DAX index is up 5.5% in two weeks and some of the biggest gainers have just started to slide away from recent highs.

Arms giant Rheinmetall is down about 7% in two sessions, although it has more than doubled this year.

Soaring shares of Siemens Energy, which were up more than 35% in November and are up more than 300% this year, fell more than 4% on Tuesday.

Key developments that could impact the markets on Wednesday:

– US CPI data

(Editing by Sam Holmes)

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