Asia & European Sessions:
- Treasuries sold off on the session with few buyers willing to step in to backstop the market ahead of CPI. Fading rate cut bets continued to weigh.
- FOMC minutes reflected a tough choice on the September 18 rate cut. There was considerable disagreement over the size of the move. A “substantial majority” favored the aggressive -50 bp action. “Some” preferred a quarter-point reduction although a “few” could have supported the smaller move. All, however, supported lowering rates at last month’s meeting as Governor Bowman dissented in favor of -25 bps.
- Wall Street caught a bid, helped by expectations for a tame CPI Thursday, with the Dow and S&P500 rallying to fresh record highs. The Dow climbed 1.03% to 42,512 and the S&P500 was up 0.7% to 5792. These are the 35th and the 44th record peaks of the year, respectively. The NASDAQ advanced 0.6%.
- Asia Session: Chinese stocks surged following the announcement of stimulus measures, as investors shifted their attention to upcoming data. Chinese investors will be looking ahead to the finance ministry press conference on Saturday for insights into fiscal stimulus plans.
- Japanese stocks present the highest weekly inflows in 6 months from foreign investors as the Yen weakened following dovish comments from Prime Minister Shigeru Ishiba.
- US CPI preview: CPI is expected to post modest gains in September of 0.1% overall and 0.2% excluding food and energy. As-expected September figures would result in the y/y headline slowing to 2.3% from 2.5% in August, and well below the 40-year high of 9.1% from June 2022. Over the rest of the year the y/y gauges will be restrained by hard comparisons that could see the potential for a slower pace of rate cuts, especially if the economy and labor market remain solid.
Financial Markets Performance:
- The USDIndex had a solid day, firming for a 6th straight session to 102.92, the highest since mid-August.
- Fading rate hike bets on the BoJ and diminishing rate cut hopes from the Fed saw USDJPY rally to 149.35, the highest since August 1.
- USOil rose after two days of decline, with UKOil trading close to $77 a barrel. The US crude stockpiles expanded the most since April, while the market remains tense over Israel’s potential retaliatory actions against Iran, as Iran has threatened to unleash thousands of missiles if necessary. President Joe Biden has advised against targeting Iranian oil infrastructure and spoke with Israeli Prime Minister Benjamin Netanyahu on Wednesday for the first time in over a month.
- Gold extended decline to $2605.
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Andria Pichidi
Market Analyst
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