Stocks fall, dollar stabilizes ahead of US inflation data

SYDNEY/LONDON (Reuters) – Stock markets fell on Thursday and the dollar held overnight gains ahead of US inflation data that will weigh on the Federal Reserve’s rate plans, while the potential collapse of a major cryptocurrency exchange worried investors.

European STOXX 600 Index (.stoxx) The broadest index in Asia fell 0.4% outside Japan (MIAPJ0000PUS.) It fell by a similar amount, as traders were wary of placing too many bets ahead of the data. US S&P 500 futures rose 0.2%.

Sky-high inflation has led the Federal Reserve to aggressively raise interest rates this year, a process that has boosted the dollar and caused US Treasuries and stocks worldwide to sell sharply.

However, hopes that the Fed might be nearing the end of this process helped the STOXX index reach a two-month high earlier this week.

The release of US CPI data, due at 1330 GMT, is the main event today for the markets as investors try to position themselves on when and at what level they think US interest rates will peak.

The report is expected to show a slowdown in both the monthly and annual core numbers for October to 0.5% and 6.5%, respectively, according to a Reuters poll.

“I think the story here is that there are many indicators of inflation peaking and volatile — like supply chains, used cars, maybe wages — but they simply didn’t show up in the CPI report, so the question is: Today is the day when all of these appear. The indicators finally?” said Sami Shar, chief economist at Lombard Odier.

“Everyone is focused on that and how that will affect pricing not only for the December Fed meeting but also at the peak of pricing policy.”

He said that if the CPI comes higher than expected, especially its basic components, prices will rise, which will be a bullish story for the dollar, while a lower than expected reading may cause the dollar to pull back some of the gains.

Markets are currently setting a 54% chance for a 50 basis point increase at the Federal Reserve’s December meeting, according to CME’s Fedwatch tool, with a good chance of a 75 basis point rise. Expectations for future meetings are divided.

The US dollar was firmer on Thursday at $0.9986 per euro and 146.38 yen.

It hit a 32-year high of 151.94 yen in October and a 20-year high against the euro in September when the single European currency fell to $0.9528.

The benchmark 10-year US Treasury yield was flat at 4.1% on the day, while European government bond yields were also largely flat.

Looming CPI data meant that markets were largely looking at the results of the US midterm elections. Republicans were close to securing a majority in the US House of Representatives while control of the Senate hung in the balance.

Corona virus outbreak in China

Another factor for markets is that China is once again struggling with the spread of COVID-19, with the southern city of Guangzhou reporting thousands of cases. Chinese blue chips (.CSI300) The Hong Kong index lost 0.7% (.HSI) It fell 1.7%.

Apple company (AAPL.O) iPhone supplier and assembler Foxconn (2317.TW) On Thursday, it said it expects steady revenue in the fourth quarter, as the company grapples with COVID-19 restrictions at a major plant in China’s Zhengzhou industrial hub.

In the cryptocurrency world, the price of Bitcoin rose 5% to $16,666 on Thursday, after falling sharply for two consecutive sessions to its lowest level at $15,632, the lowest level since late 2020.

Binance, the world’s largest cryptocurrency exchange, said late Wednesday that it had decided against acquiring smaller rival FTX, which has faced a severe liquidity crisis and warned that it faces bankruptcy without more capital.

In commodities, oil prices fell on Thursday after tumbling about 3% in the previous session on concerns about demand from China and rising US crude inventories.

US crude oil futures fell 0.16% to $85.63 a barrel, while Brent crude futures lost 0.37% to 92.39.

Gold was flat with the spot price at $1707.3 an ounce.

(Additional reporting by Stella Keogh in Sydney and Elon John in London); Editing by Sam Holmes and Emilia Sithole Mataris

Our criteria: Thomson Reuters Trust Principles.

Leave a Comment