US Equities: Higher-for-longer narrative was back in play after the hot US services CPI and a weak Treasury auction also resulted in equity weakness overnight. The S&P 500 closed down 0.6% while NASDAQ 100 was down 0.4%. The rise in yields particularly hurt the utilities and real estate sectors, and bank stocks were also lower ahead of earnings from JP Morgan Chase, Citigroup and Wells Fargo will be on tap today. Delta Air Lines reported third-quarter results that topped analysts estimates, but airline cut its full-year revenue outlook, sending its shares more than 2% lower.
Fixed income: Treasuries were sold-off amid a hot CPI and dismal 30year bond auction that bear steepened the curve. 2-year yield was back above 5% and 10-year at 4.7% but biggest gains came in 30-year which rose 16bps to 4.85%.
China/HK Equities: The Hang Seng Index gained near 2% while the CSI300 added 0.9% after the Chinese central government, through Central Huijin, increased its holdings in China's four largest state-owned banks. The banks involved are the Bank of China, the Agricultural Bank of China, the Industrial and Commercial Bank of China, and the China Construction Bank. Central Huijin's modest yet symbolic investments are very likely aimed at supporting share prices, which has led to a positive market response.
FX: Markets in a risk off overnight and dollar back in gains as hot US services CPI increased the odds of another Fed rate hike by the end of the year. Risk sensitive currencies were the most badly hurt, with AUDUSD plunging all the way to just above 0.63 handle from 0.6420 and NZDUSD back below 0.60, touching lows of 0.5920. USDJPY jumped higher to 149.80 but intervention threat capped further gains. EURUSD also reversed from 1.0640 to drop 1 big figure, and GBPUSD broke below 1.22.
Commodities: Oil prices rose slightly as OPEC said it expects crude stockpiles to slump by 3mb/d this quarter, but the course reversed again on hot PPI sending higher-for-longer narrative back in play. EIA’s weekly report showed US commercial crude oil stockpiles rose by 10.2mbbl last week although inventories at Cushing fell to its lowest since July 2022. US crude oil production reached a record 13.2m b/d last quarter according to EIA's estimates. Putting growth on track to exceed 1m b/d this year. Meanwhile, gain in European gas prices continued and Gold was hurt due to the increase in Fed rate hike bets, although $1870 support held up for now.
- US Headline CPI was hotter than expected, coming in at 0.4% MoM (exp. 0.3%, prior 0.6%) and 3.7% YoY (exp 3.6%, prior 3.7%). Core inflation was in-line with expectations, coming at 0.3% MoM, same as prior and 4.1% YoY (prior 4.3%). While headline gains could be underpinned by energy and base effects, it was the rise in shelter and the core services inflation (0.6% MoM from 0.4% prior) that garnered a hawkish reaction in the markets. Fed rate hikes for Nov/Dec are now back close to 40% from ~30% earlier following less hawkish Fed comments over the week.
- Fed’s Collins (2025 voter) echoed the message on higher bond yields reducing the need for a near-term Fed rate hike.
- US jobless claims came in at prior week’s low of 209k once again, and just a notch below 210k expected.
- UK monthly GDP for August showed a 0.2% rise in line with expectations, for 0.3% on a 3M/3M basis, also as expected.
Macro events: China CPI (Sep) exp. 0.2% YoY vs. 0.1% prior – read preview here, US University of Michigan Sentiment (Oct P) exp 67.0 vs. 68.1 prior, Singapore Q3 GDP and MAS decision – read preview here.
In the news:
- Brutal Attack Shifts Israel From Managing Hamas to Destroying It (Bloomberg)
- Bank earnings kick off with JPMorgan, Wells Fargo amid concerns about rising rates, bad loans (CNBC)
- Russian rouble rebounds after Kremlin brings back capital controls (FT)
For all macro, earnings, and dividend events check Saxo’s calendar.
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