US Markets Consolidate After Inflation Data – Nasdaq Down 0.25%
US CPI data met expectations yesterday, prompting a mixed response across financial products. The three major indices all closed close to flat, with the Nasdaq experiencing the largest move, finishing down 0.26%. The Dow closed up 0.11%, and the S&P dipped by just 0.02%. US Treasury markets reacted variably to the data, with shorter maturities pulling back from recent levels, while longer maturities recovered later in the day. The 2-year yield lost 6.9 basis points, returning to 4.275%, while the 10-year yield added 1.6 basis points after an initial drop, closing at 4.449%. The dollar, however, continued to strengthen, with the DXY rising another 0.47% to reach annual highs, ending the day at 106.49. Oil prices recovered some recent losses, with Brent up 0.54% to $72.28 and WTI up 0.46% to $68.43. Gold continued to decline, losing 0.7% to close at $2,580.93.
Resilient Inflation Could Cast Doubts for the Fed
As ever in financial markets, opinions are divided, and markets had a mixed reaction after last night’s US CPI figures matched expectations. On one hand, the alignment with forecasts suggests no immediate need to adjust expectations for the Fed’s December meeting, likely leading to a firm assumption of another 25-basis point cut if conditions remain stable. However, recent developments complicate this outlook. This latest inflation data, which has remained steady, could cause some (if not most) Fed members to question their stance, especially with the potential for significant shifts once Republicans take control next year and implement their promised policies. The dollar has clearly backed the latter view, strengthening further against multiple currencies and assets, and it will be interesting to observe if other markets follow FX trends in the upcoming sessions.
Another Busy Day for Traders Ahead
Australian markets will come into focus early in the Asian session with key employment data due for release. A 25,000 increase in employment is anticipated, with the unemployment rate expected to hold steady at 4.1%. Any significant deviation from these figures could prompt notable movements in the Australian dollar, which has recently declined. The London session remains relatively quiet, but New York promises a highly active session. Scheduled US data releases include the PPI, weekly unemployment claims, and Oil Inventory numbers, followed by speeches from influential central bank figures. Fed Chair Jerome Powell, the Bank of England’s Andrew Bailey, and the ECB’s Christine Lagarde are all expected to speak, with particular attention likely to be paid to Powell’s comments, coming so soon after the recent inflation figures.
