US Session (11/10/2021)
As a scorching inflation reading roiled financial markets, US stocks plunged the most in a month, and bond yields surged higher.
After a 30-year treasury auction yielded greater than expected, the S&P 500 fell 0.8%, extending earlier losses. Two-year yields also jumped as statistics revealed the fastest annual inflation rate since 1990, upending bets on when the Fed will raise rates next.
The Nasdaq 100 led markets lower, as its highly valued tech members are thought to be the most vulnerable to inflation. The dollar reached a 52-week high, oil fell more than 3%, and gold rose.
Stocks and bonds are becoming riskier as persistently high inflation forces the Federal Reserve to taper at a quicker pace or raise interest rates sooner than expected.
The consumer price index in the US jumped 6.2% in October, exceeding predictions of 5.9%.
Yellen restated her belief that high inflation in the US will not last beyond next year, and that the Fed will not accept price increases similar to those seen in the 1970s. Traders are concerned that the recent data may be enough to persuade the Fed to increase rates as soon as June 2022, when it will have completed tapering its asset-purchase program.
The five-year breakeven rate on government inflation-protected securities in the US hit a new high. In the meantime, the yield on the 10-year US Treasury note rose 13 basis points to 1.56%.
After setting a new high, bitcoin's gains were wiped. Due to China's real-estate woes, iron ore prices have dropped. while equities in Europe rose, while those in Asia sank.
Asia Session (11/10/2021)
Asian equities were neutral after the highest US inflation print in three decades weighed on Wall Street and spurred a rise in government yields amid concerns that monetary policy may be tightened more swiftly.
Japan and China's shares increased, while Hong Kong's equities fluctuated. As investors questioned the pricier valuations of technology firms, the S&P 500 fell and the Nasdaq 100 lagged. Futures in the US crept higher, with Tesla surging in extended trading after a filing revealed that Elon Musk sold approximately $1.1 bln of Tesla stock for tax purposes, providing some clarity on his plans. Expectations were raised as a result of evidence of building price pressures.
The evidence of rising building prices has accelerated forecasts of interest-rate hikes. Treasury yields have risen across the yield curve, with the 10-year yield rising by more than 10 bps. The tension was heightened by a poorly accepted 30-year sale. Australian and New Zealand sovereign bonds fell. Due to a US holiday, there will be no cash treasuries trading.
The dollar had reached a one-year high. Gold pared its gains, as bitcoin whirled, reaching a new all-time high before falling down. Oil has recovered from a drop driven in part by a surprise increase in US stocks.
Europe Session (11/10/2021)
As investors expected a critical US report on consumer prices to gauge the likelihood of tighter monetary policy, US futures sank along with equities. Treasury rates rose along with the dollar, but yields on inflation-protected US Treasury securities fell to near-record lows. Contracts on US indices began to fall, with the NASDAQ 100 leading the way lower.
Gains in energy companies in Europe offset a drop in luxury stocks. After statistics revealed an acceleration in Chinese inflation, MSCI Inc's Asia-Pacific index fell, but it recovered some of its losses thanks to a late-session surge in the country's property stocks.
Global equity risks are increasing as they approach all-time highs, with the Federal Reserve warning of rising asset prices. Investors will be looking for hints on policy tightening in Wednesday's inflation data.
Germany’s Chancellor Merkel's Advisors: The economy could be harmed if the ECB does not react in a timely manner; The ECB should put forth a normalization strategy.
German Government Advisors: Forecasting inflation at 3.1% this year, 2.6% in 2022.
China: We are in regular discussions regarding a meeting between Biden and Pres. Xi.
Russia's Energy Minister Shulginov: Russia gas production in 2021 is expected at 777 BCM; Oil production in 2021 is expected at 517M tons.
Thursday FX Option Expiries
EUR/USD: 1.1550 (EU823.4M), 1.2000 (EU808.3M), 1.1650 (EU605.2M)
USD/JPY: 113.70 ($1.6B), 113.60 ($1.05B), 113.00 ($969M)
USD/CNY: 6.0000 ($1.07B), 7.2000 ($720M), 6.3200 ($600M)
AUD/USD: 0.7335 (AUD518M), 0.7385 (AUD444.2M)
USD/KRW: 1177.00 ($525M), 1187.00 ($440M)