Stocks Bolstered by Inflation Drop – Nasdaq Up 2%
The Fed’s favorite inflation indicator came in with its slowest gain since March 2021 on Friday and signs that the rate cycle in the US is peaking helped to drive US indices higher. The Dow closed the day up 0.5%, the S&P 0.99% and the Nasdaq surged 1.9%. US yields dropped after peaking at 2-week highs on Thursday with the benchmark 10-year falling back just under 4%, The US dollar dropped against most of its contemporaries as well, although the outlier was the USDJPY which saw huge volatility after the BOJ meeting. Oil crept higher once again with WTI sitting above $80/b and Gold pushed higher on the weaker dollar finishing the week just under $1,960/oz.
More Central Bank Action Ahead
Traders are bracing themselves for more volatility in the market this week with another two key central bank rate announcements due. The Reserve Bank of Australia is out on Tuesday and the Bank of England is set to brief the market on its decision on Thursday. The market is currently pricing 25bps hikes from both as they look to bring inflation back in line with their targets. However, many investors are expecting to see more volatility around the statements and press conferences as both banks look to engineer soft landings for economies that have seen inflation blow out since COVID. Watch this space as if last week’s Bank of Japan event is anything to go by there could be some big moves in the Australian and British markets ahead.
Chinese Data in Focus Today
It is a relatively quiet day on the economic calendar today ahead of what could be a very busy week for traders. The focus for the Asian session will be the latest update from China on PMI numbers. With little else out on the data calendar for the rest of the day, this release could set the tone for the next few sessions. Investors have been watching a lagging Chinese economy for a while now and most will be hoping that the data will start to swing back in line with other economies. Talk of stimulus has dominated commentary recently but hopes that data will start to back that up could really assist a stronger recovery.
