US Stocks Soar Despite Higher CPI – Nasdaq up 1.5%.
US Stock markets once again ignored stronger inflation numbers and other markets’ reaction to push to fresh highs yesterday. Core CPI data printed at 0.4%, 0.1% higher than expected providing more evidence of sticky inflation conditions in the US but stocks once again drove higher, the Dow gained 0.61%, the S&P 1.12% and the Nasdaq led the way, jumping 1.54% on the day. Other markets were less bullish, the dollar gained 0.2% on the index as US treasury yields pushed higher, the 2-year up 6.9 basis points to 4.600% and the 10-year up 5.8 basis points to 4.156%. Oil dropped off as the US advised of increased output forecasts, with Brent off 29 cents to $81.92 per barrel and WTI losing 37 cents, now trading at $77.56 per barrel. Gold took a big hit on the day as the recent momentum ran out of steam, dropping 1.4% down to $2,153 per ounce on the NY close.
Impact of CPI on the Dollar
Last night’s CPI print turned into a bit of a damp squib for currency markets with most of the major pairs remaining in recent ranges. Longer term players however will be considering the higher print when we get rate updates from most of the major central banks next week. The main opportunity probably comes with the BOJ, with the market now seemingly evenly split on whether we will see the long-awaited move away from negative rates at this meeting or the next. We have seen some good yen strength over the last couple of weeks but if they do not move rates and last nights stronger CPI number starts to weigh on Fed rate cut expectations, then we could see UsdJpy back challenging those multi-year highs again, with the next move higher set to challenge levels not seen since 1990.
Smoother Trading Ahead Today for Investors
Asian stock markets are set to start the day on the front foot after a strong reaction on Wall Street after last night’s CPI data release in the States. There is very little on the calendar to disrupt that momentum, so investors will be hoping for another positive day. The UK will be in focus once again on the European Open with the release of the latest GDP data top of the list of several data releases. Traders are anticipating smoother trading conditions in the New York session with little on the event calendar, however, they are expecting to see more reaction to yesterday’s stronger-than-expected CPI print as well as more input for the bond market later in the day when the treasury holds its 30-year bond auction.
