The latest US consumer price index data has bolstered expectations for a Federal Reserve interest rate cut, fostering a positive sentiment across global equity markets. This benign inflation report has led to a surge in US stock indices, with the S&P 500 and Nasdaq 100 both advancing, driven by strong performances in the tech sector. The anticipation of a 25 basis point rate cut by the Fed later this month has also lifted equity futures in Japan and Australia, as lower US interest rates are expected to enhance global liquidity and borrowing conditions.
In the bond market, Treasury yields edged higher, reflecting market confidence in continued economic progress despite the expected rate cut. The US dollar index rose for a fourth consecutive session, supported by these higher yields, which could pose challenges for export-driven economies by making their goods more expensive. Meanwhile, the VIX, Wall Street's fear gauge, has fallen below 14, indicating a calmer market outlook and a favorable environment for risk assets like equities. "This inflation print should be risk-asset friendly and provide a tailwind to equity markets," said Jeff Schulze of ClearBridge Investments.
As of 17:50 on December 11, the VIX is trading at 13.58, down from its last close of 14.18, marking a new 52-week low. This decline in the VIX underscores the market's expectation of stability and reduced volatility in the near term, as investors anticipate the Federal Reserve's forthcoming policy decisions.