Is the final leg of inflation fight the hardest?

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Is the final leg of inflation fight the hardest?

Patrons shop for produce at a Mr. Pina Market in the Brooklyn borough of New York, US, on Tuesday, Dec. 26, 2023. 

Victor J. Blue | Bloomberg | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today 

Hong Kong rallies
Hong Kong stocks rallied on Wednesday, while the wider region traded mixed. The Hang Seng index gained as much as 3% driven by property, technology and health-care stocks. China’s CSI 300 also rose. U.S. stocks tumbled overnight, dragged lower by a 4.4% drop in Nvidia shares ahead of the chipmaker’s earnings report. The tech-heavy Nasdaq Composite fell 0.92%, while the S&P 500 lost 0.6%. The 30-stock Dow dropped 0.17%.

HSBC plunges
HSBC shares sank 3% after the lender’s annual pre-tax profit missed estimates on impairment costs from its stake in a Chinese bank. Chief Executive Noel Quinn also announced an additional share buyback of up to $2 billion.

Palo Alto Networks dips
Shares of Palo Alto Networks fell 19% in extended trading, after the cybersecurity company lowered its full-year outlook. CEO Nikesh Arora said the forecast cut was due to a “shift” in strategy and “platform migration and consolidation,” among other things.  

Vietnam wealth spike
Vietnam is poised for the sharpest spike in wealth growth over the next decade. The Southeast Asian nation is fast becoming a “popular manufacturing base for multinational tech, automotive, electronics, clothing & textile firms,” said Andrew Amoils, an analyst for New World Wealth.

[PRO] REITS to play
This may be a good time to invest in real estate despite pressure from high inflation and interest rates, according to market watchers. Pros say that exposure can come from real estate investment trusts and picked 5 REITS that are in play.

The bottom line

Is the last stage in the fight against inflation really the hardest?

Economists continue to push that notion in the face of recent troubling economic data.

Mohamed El-Erian, Allianz chief economic advisor, warned the last leg of getting inflation down to the Fed’s magical 2% target will prove to be tough.

“People realize that there’s a limit to goods deflation, goods prices actually coming down. And service inflation stays sticky, which means that getting to 2% is going to be tricky,” El-Erian said Tuesday on CNBC’s “Squawk Box.”

Investors were caught off-guard last week after U.S. consumer as well as producer prices data came in hotter than expected. That fueled market fears that the inflation fight will continue to be bumpy. 

But Fed officials aren’t sold on the final leg commentary.  

“That suggests that we have to grind out the last two-tenths of a percentage point on inflation just laboriously, and I don’t see evidence that’s true,” noted San Francisco Fed President Mary Daly recently. 

“We have to be more thoughtful of how we get there,” she added. “But I don’t buy into this idea that its going to be so much harder.”

Wall Street’s attention will turn to Fed minutes from January’s policy meeting on Wednesday. But investors expect few surprises.

It is likely to reveal broad support for delaying the first rate cut beyond March, giving policymakers more time to assess the path of inflation.

— CNBC’s Yun Li contributed to this report

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