Written Commentary
Light data schedule, various ECB speakers and U.S. bonds closed for Veterans’ Day may allow for a ‘pause for breath’ after recent volatility.
- U.S.A.: Breadth of CPI increases ‘disturbing’ as per Chicago Fed’s Goolsbee, but FOMC likely to stick with gradual increases, rather than hitting the panic button.
- ADM IS USDA WASDE commentary
EVENTS PREVIEW
Today’s statistical schedule appears unlikely to have much impact on markets, after the upside surprise on U.S. CPI sent U.S. Treasuries and other G7/Eurozone government bonds into something of a tailspin, in no small part exacerbated by the pre-CPI release comments from Fed’s Waller that put a 50 bps rate hike on the table for December.
Given that the risk asset rally on Monday had a lot of hope invested in negotiations related to the Iran and Ukraine conflicts, despite uncertainty around the investigation into Nvidia CEO Huang, along with the Anthropic IPO, the stage looks to be set for further volatility, with AI investment concerns, rate hike speculation, and the numerous national and geopolitical tensions making for a very complex ‘macro’ backdrop.
With the U.S. bond market closed for Veterans’ Day (though equities will be open), and a few countries in Europe closed for Armistice Day, the events schedule has a busier run of ECB speakers and OPEC’s monthly Oil Market Report, while German utility companies headline a modest run of corporate earnings.
As Chicago Fed’s Goolsbee commented yesterday, the U.S. CPI data were disturbing because of the breadth of CPI increases. But as much as the debate on the December Fed rate move has now moved on from no change or a 25 bps hike to 25 or 50 bps, the FOMC majority is very likely to stick with 25 bps moves, above all to avoid signalling a sense of panic on inflation and, by extension, rates, which could engender a very adverse reaction in what are already quite febrile financial markets.
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