Stocks dip, dollar holds steady ahead of US inflation data

Sydney / London, Nov 10 (Reuters) – The stock market edged down on Thursday and the dollar held onto overnight gains before US inflation data that will influence the Federal Reserve’s rate plan, while the possibility of the collapse of a major crypto exchange rattled investors.

STOXX 600 European index (.STOXX) down 0.4%, and the biggest stock index outside of Japan (.MIAPJ0000PUS) dipped by a similar amount, as traders were cautious to put too many bets ahead of the data. US S&P500 futures rose 0.2%.

Sky-high inflation has caused the Fed to raise rates aggressively this year, a process that has boosted the dollar and caused US Treasuries and stocks around the world to sell off sharply.

Hopefully the Fed can get close to the end of this process helping the benchmark STOXX to a two-month high earlier this week.

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

The report is expected to show a slowdown in 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 rolling over – such as the supply chain, used cars, maybe wages – but they are simply not shown in the CPI report, so the question is: is today the day that all these indicators finally appear? ” said Samy Chaar, chief economist at Lombard Odier.

“Everybody’s focused on that and how that’s going to affect prices for not only the December Fed meeting but also the peak policy rate.”

He said if the CPI came higher than expected, especially the core component, then the price would rise, which would be a bullish story for the dollar, while the print was lower than expected, which could cause the dollar to give back some gains.

The market is currently pricing in a 54% chance of a 50-basis-point increase at the Fed’s December meeting, according to CME’s Fedwatch tool, with still a good chance of a 75-basis-point increase. Expectations for future meetings are shared.

The US dollar was fractionally 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 peak against the euro in September when the common European currency fell below $0.9528.

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

The looming CPI data means the market largely looks through the results of the US mid-term elections. Republicans are edging closer to securing a majority in the US House of Representatives while control of the Senate hangs in the balance.


Another factor for the market is that China is again grappling with a surge of COVID-19, with the southern metropolis of Guangzhou reporting thousands of cases. Blue-chip China (.CSI300) lost 0.7% and the Hong Kong benchmark (.HSI) down 1.7%.

Apple Inc (AAPL.O) supplier and iPhone assembler Foxconn (2317.TW) said on Thursday it expected revenue to average in the fourth quarter, as the company grapples with the impact of COVID-19 at its main factory in China’s industrial hub Zhengzhou.

In the crypto world, bitcoin rose 5% to $16,666 on Thursday, after falling sharply for two straight sessions to $15,632, the lowest level since the end of 2020.

Binance, the world’s largest crypto exchange, said late Wednesday that it has decided not to acquire smaller rival FTX, which has grappled with a severe liquidity crunch and warned it faces bankruptcy without more capital.

In commodities, oil prices fell on Thursday, after falling about 3% in the previous session on fears of demand from China and a rise in US crude stocks.

US crude oil futures were 0.16% lower at $85.63 per barrel, while Brent crude futures lost 0.37% to 92.39.

Gold was stable with the spot price at $1,707.3 per ounce.

Reporting by Stella Qiu in Sydney and Alun John in London; Editing by Sam Holmes and Emelia Sithole-Matarise

Our standards: Thomson Reuters Trust Principles.

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