Class CNBC Interview 11/10/22
November 10, 2022
US Inflation Cools Dow Rallies Will Fed Ease Rate Hikes Eicher In Focus
November 11, 2022On Thursday, the Dow Jones and Nasdaq jumped more than 3% and 7% respectively while the S&P 500 soared 5.54% after news of a stronger-than-expected slowdown in US inflation .
The stock markets celebrated Thursday the announcement of a stronger than expected slowdown in US inflation in October, a surprise that dragged the dollar down, spurred a sharp easing in the bond market and propelled the indices to Wall Street.
The Dow Jones index climbed 3.70% and the Nasdaq made the unprecedented jump of 7.35%. The S&P 500 soared 5.54%, to register its best session since the start of the pandemic. The good news on inflation swept away the uncertainties that had plagued traders the day before, on the electoral front.
After an opening in the red, the European indices accelerated after the announcement of a drop in American consumer prices: the Frankfurt Stock Exchange climbed 3.51%, the Parisian place gained 1.96% and that of London 1.08%. Inflation slowed in the United States in October, to 7.7% year on year from 8.2% in September, its lowest level since January 2022, a sign that the measures taken by the central bank (Fed) could begin to bear fruit.
“Almost everyone thinks inflation is over”
“Investors, forecasters, households, the Fed, almost everyone in the United States thinks that inflation has passed or is passing its peak,” observes Bruno Cavalier, chief economist at Oddo BHF. A turning point, “after two years of only skidding prices (…)” and “finally a figure that can give the Federal Reserve (Fed) an argument to slow down the pace of its price hikes. rate,” he continued.
For Peter Cardillo of Spartan Capital Securities, this jump in the indices could mean “the end of the + bear market + or bear market”. But, according to Bruno Cavalier, the question is “to know how quickly US inflation can ebb”. US President Joe Biden has himself warned that a return to normal levels will take “time”.
The Fed has raised its key rates sharply since March to curb soaring prices. At the beginning of November, it increased its main key rate for the fourth consecutive time by three quarters of a percentage point to bring it to a range between 3.75% and 4%, the highest for nearly 15 years. The continuation of the monetary tightening cycle is not in doubt for the market, but faced with the downturn in American inflation, it is beginning to envisage that the American central bank could slow down, starting at its next meeting in mid-December.
The dollar depreciates, the bond melts
In this perspective, government bond yields melted like snow in the sun: the US ten-year rate fell to 3.82%, against 4.0% at the close on Wednesday and the German Bund, which benchmarks in Europe , stood at 2.01%, down from 2.16%. The dollar nosedived Thursday against the pound and to a lesser extent against the euro, after the marked turn in US inflation.
Around 7:50 p.m. GMT, the greenback lost 2.92% to 1.1690 dollars for one pound, the British currency rising to its highest level since the end of August. The dollar sank 3.32% against the Japanese currency to 141.77 yen to the dollar, its highest for the yen since September 6. As for the euro, it took 1.68% to 1.0179 dollars for one euro, the European currency rising to a peak since mid-August against the greenback.
On the cryptocurrency side, bitcoin rebounded 10.52% to $17,387, after starting the session at its lowest since November 2020 at $15,574. The collapse of trading platform FTX, which was to be bailed out by rival Binance before the latter threw in the towel, has caused bitcoin to lose almost a fifth of its value since Sunday.
Vigorous Tech
Tech mega-caps soared like Meta, parent company of Facebook (+10.25% to $111.87), Apple (+8.90% to $146.87), or even Alphabet, parent company Google (+7.75% to 94.17 dollars). In Europe, this was the case for Zalando (+13%) and Delivery Hero (+18%) in Frankfurt, while Dassault Systemes and Worldline gained more than 7% in Paris.
