As London and European traders head home for the day, the major continental indices are mostly higher, with Spain leading the way. The UK’s FTSE 100 went the other way. In the US, the stronger-than-expected CPI report is still driving the bond and currency markets. The 10-year Treasury yield is back above 5%, the dollar is higher across the board, and an early Nasdaq rebound on Anthropic IPO news has given way to renewed selling.
Spain leads European stocks higher. The FTSE 100 lags.
Spain’s IBEX 35 rose 0.98%, followed by Italy’s FTSE MIB at +0.69%, France’s CAC 40 at +0.55% and Germany’s DAX at +0.31%. The UK’s FTSE 100 fell 0.29%.
European benchmark yields moved higher across the board. France’s 10-year led the move, up 8.5 basis points to 4.806%. Germany rose 7.5 basis points to 3.328%, Spain and Italy each rose 7.4 basis points to 3.896% and 4.380%, respectively, and the UK rose 6.8 basis points to 5.208%.
Hotter US CPI pushes the 10-year back above 5%
October headline CPI rose 0.4% versus 0.3% expected, while core CPI rose 0.3% versus 0.2% expected. Headline inflation slowed from September’s 0.6%, but core matched the prior month. On a three-month annualized basis, headline CPI was running at 5.7% and core at 3.7%. The upside surprises gave traders another reason to price in tighter Fed policy after Governor Christopher Waller raised the possibility of a 50-basis-point hike in December.
The US 2-year yield was up 21.4 basis points to 4.761%, the 5-year was up 18.4 basis points to 4.843%, and the 10-year was up 15.5 basis points to 5.017%. The 30-year rose 11.9 basis points to 5.375%. For the rest of the US session, 5% is the barometer for the 10-year. The next thing to watch is whether yields can hold above it.
Waller put 0.3% core CPI in focus before the release
Speaking in London before the CPI report, Fed Governor Christopher Waller said he was leaning toward a 25-basis-point hike in December even if inflation cooled in October. If core CPI came in around 0.3% or higher, he said the Fed should consider 50 basis points. His reasoning was that the economy was still growing at a solid pace, the labor market was stable, and inflation was broad enough that moving too slowly could put the Fed’s credibility at risk. Core CPI came in at 0.3%, right around the level he had flagged. That helps explain why the 2-year yield led the move higher, jumping more than 21 basis points to 4.76% by the European close.
Waller also made a point that ties into today’s drop in crude. Oil can fall on hopes for de-escalation in the Middle East, but he said limited refining capacity could keep diesel prices elevated even as crude gets cheaper. For the Fed, the question is how much of those higher energy costs are still feeding through to the prices of other goods and services.
Anthropic gives the Nasdaq a lift, but the gains fade
The Nasdaq indices erased their early losses and briefly moved into positive territory after reports that Anthropic is targeting November 18 to price its IPO and November 19 for its trading debut. Reports indicated that orders already covered the available shares and that roughly 20% of the offering could go to retail investors.
By the European close, the Nasdaq Composite was back down 1.21% and the Nasdaq 100 was down 1.22%. The Dow was down 0.56%, the S&P 500 was down 0.77%, and the Russell 2000 was down 1.18%.
The dollar extends its gains. Gold and silver slide.
EURUSD was down 0.65% at 1.1150 and GBPUSD was down 0.86% at 1.3325. Both pairs moved back below their 200-hour moving averages after CPI. Those averages now give sellers a nearby level to lean against. USDJPY was up 0.56% at 158.79, near its session high of 158.84. AUDUSD was down 1.08% at 0.6851, the largest decline among the major currencies in the snapshot.
Gold was down 2.8% near $4,023 and silver was down 3.9% near $51.32 as yields and the dollar moved higher. Bitcoin was down about 2.6% near $73,020.
Crude oil remains lower, but buyers return from below $84
WTI was down $0.31 at $86.54 after trading as low as $83.88. That puts it $2.66 off the low and within $0.39 of the session high at $86.93. Brent was down $0.64 at $91.93 after dipping to $89.16.
On the Middle East front, President Trump played down the prospect of renewed major strikes against Iran after meeting with Qatar’s prime minister on Monday. Secretary of State Marco Rubio reinforced that message on Tuesday, saying the administration saw less need for major combat operations while sanctions and the naval blockade remained in place. Iran’s top security official said no negotiations with Washington were underway, and the Strait of Hormuz remained a sticking point. The softer US tone helped take some of the supply risk premium out of crude early, but both benchmarks had recovered much of their losses by the European close.
This article was written by Greg Michalowski at investinglive.com.