We see global markets little changed but equities maintaining recent gains on optimism that today's US CPI report would show a slowdown in price pressures last month, underpinning the view that interest rates have peaked. We see slight gains in Europe and Wall Street trading near flat. Tech is slightly outperforming and helps the Nasdaq to currently trade 0.25% higher after yesterday's slightly negative close. Snap gained 5% after reports of a collaboration with Amazon. Nvidia increased gains for a potential tenth consecutive positive session, its longest winning streak in almost seven years.
We see commodity prices little changed with also energy prices flat after some gains yesterday. We also see sideways movement in the forex markets with the EUR a bit outperforming after sentiment data in Germany / Eurozone improved surprisingly.
Analysts expect US inflation likely fell to an annual rate of 3.3% in October, down from 3.7% in September – which would look like a significant cooling. However, core inflation, which excludes energy and food cost will likely remain unchanged, which would keep concerns of the Fed elevated. The price calculation for health insurances is changing – which may result now in a “positive” impact on inflation and is a fact that most analysts are not aware of.
Markets are very confident that the Fed and other central banks have completed their rate hike cycle. While I generally agree with the view – especially for the ECB, the optimism could be challenged today – in particular when core inflation comes in at 4.1% or higher. I expect an initial positive reaction on CPI data due to cooling headline inflation but then the realization that inflation remains stubborn.
Further rather hawkish comments from Fed officials later today could further decrease the optimism about drastic easing of monetary policy next year.
👁 ROB'S MARKET OVERVIEW:
⚠️ Today's movements will be driven by the outcome of US CPI data. We expect cooling US headline inflation but stubborn core inflation.
November 14, 2023
🇺🇸 US Markets ↗️/↕️/↘️ (initial gains on lower headline inflation, then headwinds as core inflation remained stubborn)
EUR ↗️/➡️ (benefited from improving sentiment data)
USD ➡️/↘️/↗️ (headwinds on cooler headline inflation; then support as core inflation remained stubborn + hawkish Fed comments)
JPY, CHF, CAD ➡️
AUD, GBP ➡️/↘️ (unless US inflation + core inflation comes in cooler than expected, then gains for AUD, GBP, CAD)
⚒ Commodity Markets ↕️ (headwinds if core inflation shows stubbornness)
Oil prices ↕️
Natural Gas prices ↕️/↘️
Metal prices ↕️
Gold ➡️/↘️ (increased volatility post CPI data – if yields rise on stubborn inflation, headwinds on gold)
⚡️Cryptos ↕️/↘️ (higher if US inflation + core inflation comes in cooler than expected)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)