Core CPI increased 4.6%, the fastest gain since August 1991
Wall Street stocks extended the retreat overnight after October’s consumer price reading showed the biggest annual jump in more than 30 years. The CPI surged 6.2% from a year ago in October, the most since December 1990. Furthermore, core inflation increased 4.6%, the fastest gain since August 1991. As such, the Fed funds futures market now sees greater odds of the Fed’s first full rate hike coming in mid-2022. Against this backdrop, the Dow Jones Industrial Average shed 0.7%, the S&P 500 fell 0.8%, and the tech-heavy Nasdaq Composite dropped nearly 1.7%.
Asian stocks were mixed on Thursday as investors digested the CPI data out of the US. On the positive side, the Chinese property giant Evergrande had once again avoided a default after meeting bond-payment deadlines. The company’s stocks surged nearly 7% on the news, sending the Hang Seng 1% higher. In Japan, the Nikkei 225 advanced 0.6% while the South Korean Kospi shed 0.17%. In a sign of further improvement in risk sentiment, European stocks were little changed in early trading.
In currencies, hotter-than-expected CPI data pushed the dollar higher across the market amid rising worries about the escalating inflation that could cause the Fed to tighten policy more quickly than it has signaled. As such, EURUSD plunged below the 1.1500 figure for the first time since July 2020 and extended losses to the 1.1450 region early on Thursday before bouncing slightly in recent trading.
Elsewhere, oil prices plunged after inflation data out of the US hit risky assets across the globe. Brent crude extended losses to the $82 area to settle back below the 20-DMA. The market was also pressured by industry news – the Energy Information Administration reported an inventory build of 1 million barrels for the week to November 5. In gasoline, the agency estimated inventories had shed 1.6 million barrels, while in middle distillates, inventories fell by 2.6 million barrels last week.