Global Markets Brace for U.S. Inflation Data Amid Bond Yield Fluctuations

On Tuesday, U.S. and European stocks rose as bond sell-offs calmed, but investors were cautious awaiting U.S. inflation data and Trump's inauguration. The U.S. producer price index increased by 0.2% in December, below expectations. Focus turns to upcoming inflation data, as higher bond yields impact equity valuations.

On Tuesday, U.S. and European stock markets experienced a modest uptick as a recent bond sell-off showed signs of easing. This cautious optimism comes as investors prepare for the upcoming U.S. consumer price inflation data set to release on Wednesday, alongside the anticipated inauguration of Donald Trump as president next week.

The latest data revealed a 0.2% increase in the U.S. producer price index for December, falling short of the forecasted 0.3%. Despite an initial rally, both stock and bond prices reversed later in the session. The markets' primary focus remains on the impending inflation figures expected to indicate a month-on-month rate holding at 0.3% and a year-on-year rise to 2.9%.

European shares saw a recovery, with the STOXX 600 climbing by 0.3% after a previous drop. Investors are particularly attentive to Trump's economic strategies and their potential impact on tariffs and inflation. Market volatility is increasingly tied to movements in bond yields, which affect equity valuations as yields present a more attractive investment and drive up borrowing costs for corporations.

(With inputs from agencies.)