The S&P 500 and Nasdaq rallied like there’s no tomorrow, marking their largest daily percentage increases since April 27. This risk-on appetite is fuelled by the declining yields and encouraging U.S. inflation data. The U.S. Consumer Price Index (CPI) remained stable last month, coming in below the expectations of a 0.1% increase.
Additionally, the core CPI rose by just 0.2%, lower than the anticipated 0.3%. These figures suggest a potential shift in the Federal Reserve's stance, with futures markets now indicating a 34% probability of interest rate cuts as early as March, and a definite pivot by May.
JPMorgan CEO Comments on Inflation Trends
Jamie Dimon, CEO of JPMorgan Chase, expressed concerns about inflation's persistence, warning against overreaction to short-term data. Dimon highlighted the potential need for the Federal Reserve to continue its cautious approach, possibly requiring further action to manage inflation.
Dollar gets hammered
The dollar depreciated against almost every major currency with especially large moves in the EUR/USD. After hitting a low in early October, the euro has rebounded, surpassing the 1.0800 level. At least this gave the BoJ some breathing room after the yen reached its lowest rate against the greenback on Monday.
Chinese Economic Data Surprises to the Upside
China's economy showed signs of strength, with consumer spending exceeding expectations in October. Retail sales grew by 7.6% year-over-year, bolstered by the Golden Week holiday. Industrial production also outperformed forecasts with a 4.6% increase. However, it’s not all good as we saw a slowdown in fixed-asset investment and a decline in property investment.
Upcoming U.S. Economic Data
Markets are waiting for the upcoming data on U.S. producer prices and retail sales, as it could influence the Federal Reserve's policy direction. A weaker consumer may suggest less need for further tightening, while strong consumer data, combined with lower inflation, could indicate reduced recession risks. Either way, markets are likely to see the data as a “glass half full” in light of yesterday's inflation number and overall sentiment.
Stock news:
Berkshire Hathaway: Warren Buffett's company rebalanced its portfolio, exiting positions in General Motors and Activision Blizzard, and reducing stakes in other companies like HP.
Scion Asset Management: Led by Michael Burry, the firm ended its bet against the S&P 500 and Nasdaq 100, shifting focus to semiconductor stocks, including Nvidia and long positions in Alibaba.
Deutsche Bank's: Take-Two Interactive Software (TTWO) upgraded to 'buy' from 'hold,' with a raised target of $175.
JPMorgan's Assessment on Tyson Foods (TSN): The investment firm lowered Tyson Foods' price target to $51 from $55
Key events today:
UK CPI, PPI at 08:00 CET
Industrial Production in the EU at 11:00 CET
US PPI and Retail Sales at 14:30 CET
FOMC Barr Speaks at 15:30 CET
Key earnings today:
Palo Alto Networks Inc |
TJX Companies Inc |
Target Corp |
JD.Com Inc |
Kohls Corp |
Infineon Technologies AG |
Alstom SA |
Wishing you successful trading,