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It was another wild day for American markets, U.S. inflation shows more signs of picking up, and could China be poised to relax capital controls? Here are some of the things people in markets are talking about.

Manic Markets

A rally in global stocks looks set to continue in Asia, after U.S. stocks extended a rebound and Treasury yields rose to a four-year high as economic data supported expectations that the Federal Reserve will maintain a gradual approach to raising interest rates. The S&P 500 Index climbed for a fourth day as banks and durable-goods makers rallied, returning the gauge to a gain for the year after it fell more than 10 percent from a January peak. Gold rallied and the dollar slumped as the 10-year Treasury yield topped 2.9 percent. Signs of an inflation pickup have roiled financial markets this month, and stock futures tumbled early Wednesday on concern the Fed would quicken its pace of tightening following data that showed faster-than-forecast inflation. Those fears quickly receded as investors digested a separate report showing weak retail sales that raised questions about the economy’s strength.

Speaking of Inflation

The most widely watched U.S. CPI print in recent memory didn’t disappoint. Consumer prices rose by more than projected in January as apparel costs jumped the most in nearly three decades. The CPI gained 0.5 percent from the previous month, above the median estimate of economists for a 0.3 percent increase – making it look like a worthwhile decision for the Asia trader who stayed up with pizza and diet Coke. Retail sales unexpectedly declined in January and December receipts were revised lower, indicating consumer demand in the first quarter may cool. In Japan, the slowest economic growth in two years and the strongest yen in 15 months highlight the country's ongoing struggle to revive inflation even as prices elsewhere in the developed world begin to inch higher. And China's PBOC said inflation pressures are "slight" but warrant close watch.

Could Beijing Relax Capital Curbs?

In the fraught history of Chinese currency policy, a new chapter could be looming this year as authorities consider the consequences of a yuan that’s testing its strongest levels since mid-2015. After successfully shutting off potentially destabilizing capital outflows and putting a floor under the yuan, policy makers may now have the luxury of looking at relaxing some of the strictures on domestic money. While no officials have clearly signaled an intent to relax controls, recent comments and moves hint at the potential for modification of the one-way capital account opening that China has been pursuing since 2016 -- in which it has encouraged inflows but not outflows. Still, China watchers warn that any moves are likely to be gradual and calibrated, given the turmoil of 2015 -- when a sliding yuan spooked global markets.

Indonesia on Hold

Bank Indonesia is likely to keep its policy rate at 4.25 percent on Thursday, according to all 19 economists surveyed. Officials have been in a holding pattern since back-to-back cuts in August and September that capped an aggressive run of monetary policy easing that began at the start of 2016. The economy has picked up pace and inflation is under control, with consumer prices rising at the slowest pace in more than a year in January. But the rupiah has become volatile, falling 2 percent against the dollar since Jan. 29 to become the worst-performing currency in Asia. Bank Indonesia has made it clear it will continue to intervene to support the currency, which could also come under pressure as interest rates rise in the U.S. and elsewhere. The global selloff has also led to more than $560 million of net withdrawals from Indonesian bonds this month.

Coming Up…

While China will be off to celebrate Lunar New Year, Australian rates traders will be gearing up for the monthly labor market report to see if the country can go on adding jobs at last year's record pace. We also get trade data for Singapore, Indonesia and India, along with the rate decision from Indonesia's central bank. Europe features CPI from Spain, Greece and Ireland.

What we’ve been reading

This is what caught our eye over the last 24 hours.

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