- USDIndex – Spiked to 113.80 following hot reading for CORE CPI and then reversed sharply into 112.20 as Stocks staged a record reversal (from -3% to +over 2%) on short covering, technical floors being tested and ? perhaps assumptions that the top is finally in for inflation (Headline fell for 3rd consecutive month). Yields also whipsawed, with at one point, all major maturities above 4%. (US 10yr closed 3.902% & the 2/10 year rate inversion {a sign of recession} sits at 51bp). 75 bp fro Nov 2 fully priced in, and a 71% chance of a further 75bp in December. (This will take hikes since March to 450 bp).
- The UK’s new fiscal policy remains squarely under threat as Chancellor Kwarteng returns from the IMF meetings a day early (last person to do that was the Greek Fin. Min. in 2011 and many are predicting a similar outcome both politically and economically). The BOE’s Bond-Buying programme ends today, uncertainty swirls as tax U-turns become priced in. Sterling rallied and then rallied again, but Gilts remain fragile. Asian markets follow Wall Street higher (Nikkei +3.25% Hang Seng +2.64%) & European FUTS also higher.
- EUR – rotated through 0.9700, down to 0.9632 before rallying to 0.9800.
- JPY – rallied to new 32-year (1990) highs at 147.67 and with no signs of BOJ action! Suzuki and Kishida remain committed to accommodative policy. Trades at 147.35 now.
- GBP – Sterling rallied from .1.1075 to over 1.1300 to 1.1375. Immense pressure on PM Truss & Chancellor Kwarteng to reverse tax cuts as successors are rumoured and the Tories are 30% behind in opinion polls.
- Stocks – Wall Street dove on the data given the jump in rates and as the market priced in greater risk for a hard landing. The NASDAQ plunged over -3.0%, with the S&P500 over -2.25% lower, and the Dow down almost -1.90% before turning around to end with solid gains. The Dow rallied to close with a 2.83% gain, a 1400 point round-trip, while the S&P 500 was up over 3% before ending with a 2.60% gain. US500 3577. BLK (assets tumbled but earnings beat)+6.58%, BAC +6.13%, NFLX +5.27%, APPL +3.36%. US500 FUTS trades at 3706 now.
- USOil – declined again on the CPI data & global recession worries into $85.51, before reversing sharply to $89.50 as USD weakened and risk aversion dipped.
- Gold – plunged to $1642 before recovering to trade at $1668 now but remains pressured.
- BTC – plummeted to $17.9K yesterday, trades at $19.8k now.
Today – US Retail Sales, US University of Michigan Prelim Survey, Speeches from BOE’s Bailey, Fed’s George, Cook & Waller. Earnings from Wall Street banks JPM, Citi, MS Wells Fargo.
Biggest FX Mover @ (06:30 GMT) NZDJPY (-0.96%) rallied from sub 81.20 lows yesterday to 83.75 highs today. MAs aligned higher, MACD histogram & signal line positive & rising, RSI 70.00, OB & rising, H1 ATR 0.186, Daily ATR 3.201.
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Stuart Cowell
Head Market Analyst
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