Geoffrey Smith 

Investing.com — U.S. Inflation is likely to hit a record 40-years high in December. This test will show whether the market has regained confidence that it can handle a tightening monetary policy. China’s lower producer price inflation gives the central bank greater flexibility to safeguard its financial and real estate sectors. Biogen (NASDAQ) shares plummet following an adverse impact on its revenue prospects. On Tuesday, the United States posted an unprecedented high number of Covid hospitalized patients. Weekly data is also available on U.S. crude oil stocks. This is what you should know about financial markets Wednesday 12 January. 

1. Inflation, inflation, inflation

U.S. Inflation figures for December will be released at 8:30AM ET (1330 GMT). This is a tough test for a market which has risen for the second consecutive day since Federal Reserve Chair Jerome Powell decided not to make any new bombshells at the Senate hearing on Tuesday.

Analysts project that consumer price inflation will reach 7.0% in the coming year. Core CPI, however, is likely to rise from 4.9% to 5.4%. Core and headline rates for the month will give a clearer picture of present dynamics and are likely to increase 0.4% and 0.5%, respectively.  

There will be the usual caveat regarding the numbers: The CPI isn’t the inflation measure the Fed attaches the most importance to. Pandemic-related distortions in spending patterns and seasonal adjustments, as well as pandemic-related fluctuations of spending patterns, also prevent us from reading too much into these figures. However, a 40-year high is still a 40-year high, whichever way it’s cut.

This phenomenon is not limited to the United States. The Organization for Economic Cooperation and Development said that inflation across the world’s advanced economies in general hit 5.8% at the end of last year.

2. China’s central banks receives some relief from the price pressure 

Anyone looking for signs of global inflation pressures easing can take comfort from China’s latest data, which showed consumer prices falling 0.3% in December and the annual rate of inflation falling to 1.5%. 

Global businesses and consumers will be more pleased to see that the Chinese producer price inflation fell to 10.3% in China over the past year. This is clearly lower than what was expected, which would have been 11.1%.

The figures suggest that the People’s Bank of China will have the leeway it needs in order to loosen monetary policy further to relieve the strain on a struggling real estate sector. This optimism boosted everything, including Hong Kong tech shares as well as iron ore prices. It was helped also by the severe weather in Brazil.

3. Stocks open to mixed, Biogen at the center

U.S. stocks set to open in holding patterns later, after two days’ gains. The overnight session in futures is being controlled by CPI numbers.

At 6:20 AM ET they had gained 42 points (or 0.1%), while also being up 0.1% and up 0.2%.

Stocks likely to be in focus later include Biogen, which slumped some 10% in premarket after regulators said that Medicare coverage of its Alzheimer’s drug aduhelm will be limited to patients enrolled in clinical trials. That’s the latest twist in a saga that exploded in controversy last year when the Food and Drug Administration approved the drug over the objections of some of its own senior experts.

Meta Systems stock will also be under scrutiny, as the owner of Facebook (NASDAQ:), Tony Xu was appointed to the board by DoorDash to advise it on its expansion to e-commerce.

4. U.S. Covid Deaths Rise to 3 Month High; Hospital Admissions Hit Record Level

Schools will be provided with free Covid-19 test kits by the federal government in order to combat Omicronvariant Disease. This is because teachers and students are both suffering from it.

The number of hospitalizations for Covid-19 in the U.S. rose to its highest level ever on Tuesday. This was a major setback for people who had hoped the more severe Omicron symptoms would allow the economy to weather the new wave of infections. In the U.S., Covid-related death rates reached their highest level since October.

Quebec announced a radical new policy that would tax unvaccinated persons to get them vaccinated. China, however, continues to tighten restrictions on mobility, particularly for flights in and out.

5. The oil market surges ahead of data on inventories

Crude oil prices continued their ride higher after Jerome Powell’s comments at his confirmation hearing kept a soft tone on the dollar.

The U.S. government will release its weekly data for crude and product inventories at 10:30 AM ET as usual, a day after the American Petroleum Institute reported a 10 million barrel build in gasoline inventories (belatedly corroborating the government’s data from the previous week).

Futures rose 0.8% to $81.83 per barrel by 6:30 AM ET. They were 0.6% higher at $84.20 per barrel at the same time.