Morning Bid: Inflation test focuses Fed row

• Global central bank officials plan to release a coordinated statement supporting Powell on Tuesday, following what Powell called 'pretexts' for undermining Fed independence
• U.S. GDP growth exceeded 4% in late 2024, and oil prices rose to November highs after President Trump threatened 25% tariffs on countries doing business with Iran
• Japan's yen plunged to its weakest since July 2024 on snap election speculation, pushing the Nikkei up 3% and driving 10-year government bond yields to their highest since 1999

Market Summary: Inflation Test Focuses Fed Row

Key Developments

Federal Reserve Independence Concerns: Global central bank officials plan to release a coordinated statement supporting Fed Chair Jerome Powell on Tuesday, following political pressure threatening Fed independence. Markets showed relatively modest reactions despite what Powell termed "pretexts" for undermining the Fed's autonomy.

Critical Inflation Data: December CPI figures due Tuesday are expected to show core inflation rising to 2.7% from November's 2.7%, well above the Fed's 2% target. U.S. GDP growth ran above 4% into year-end, raising concerns about persistent price pressures.

Interest Rate Outlook: Futures markets now price the next Fed rate cut for late July, with only two additional cuts expected in 2026. Two-year Treasury yields hit their highest in almost a month, while 10-year yields approach September highs.

Corporate News

• UBS: CEO Sergio Ermotti, who oversaw Credit Suisse's emergency takeover, will step down in April 2027
• Alphabet: Added $200 billion in market value after announcing Apple's AI models will use Google's Gemini in a multi-year deal
• Q4 Earnings: JPMorgan and Bank of New York Mellon report Tuesday, kicking off a strong banking earnings season driven by increased deal-making activity

Additional Market Movers

Iran Sanctions: President Trump announced 25% tariffs on countries doing business with Iran, pushing U.S. crude to highest levels since early November.

Japan Markets: Yen plunged to weakest since July 2024 on snap election speculation, while the Nikkei surged 3%. Japan's 20-year bond yields hit record highs.

Market Positioning: U.S. stocks pulled back from record highs amid information overload, with futures pointing to lower opening.