On Friday, global stocks experienced a downturn as recent U.S. inflation data exceeded expectations. With Europe set to release its consumer price data, there’s rising anticipation about central banks possibly maintaining elevated interest rates.
The MSCI index, which tracks global equities, witnessed a 0.3% drop. Concurrently, Europe’s Stoxx 600 index fell by 0.2% in the wake of a challenging session in Asia.
Recent U.S. data unveiled a spike in consumer prices for September. A notable increase in rental costs caught the attention of economists who gauge such patterns to determine if inflation is consistently surpassing targets.
Ryan Brandham from Validus Risk Management remarked, “These numbers will embolden those advocating for another Federal Reserve rate increase.”
Following the release of this inflation data, futures markets indicated a 40% likelihood of a U.S. rate increase in December, a jump from the 28% probability anticipated earlier.
According to a report by Reuters, Europe awaits inflation data from Sweden, Spain, and France today.
Thursday’s U.S. inflation revelation, coupled with a lukewarm demand for a U.S. 30-year bond auction, resulted in a surge in Treasury yields. Come Friday, however, the 10-year Treasury note yield dipped slightly but didn’t approach its two-week low.
Ray Attrill of the National Australia Bank observed that the recent U.S. Consumer Price Index report disrupted positive trends in the U.S. yield curve from the past week.
Asian markets, straddling concerns about escalating dollar borrowing costs and China’s economic deceleration, saw a drop of 1.2% in MSCI’s non-Japan equity index.
Fresh data reveals that China’s consumer prices remained stable in September, even as the pace of factory-gate price deflation moderated. Meanwhile, Japan’s Nikkei index declined by 0.53%.
Tensions in the Middle East further weighed on the global market mood. European Union foreign policy chief Josep Borrell emphasized the necessity of collaborative efforts among Europe, China, and the U.S. to navigate the crisis. Israel expressed its dismay at China’s silence over recent Hamas-initiated attacks.
The dollar maintained its strength in currency dynamics, with minor fluctuations in the euro and sterling. The yen’s position reflected external pressures, hinting at potential intervention by the Bank of Japan.
Gold prices experienced a slight uptick yet lingered below recent two-week highs. On the other hand, oil prices surged in light of intensified U.S. sanctions on Russian crude exports.
Investors remain vigilant, monitoring potential disruptions to Middle Eastern oil exports amidst the ongoing Gaza crisis.
