The main focus on Tuesday was the sharp hawkish repricing following Fed Governor Waller’s comments and the hotter-than-expected October CPI report, reigniting the debate around a potential 50 basis point Fed hike in December. Waller said further tightening is needed sooner rather than later and suggested a half-point hike may be warranted if October core CPI came in around 0.3% or higher. The subsequent report showed core CPI rising 0.3% M/M, above the 0.2% forecast, while headline CPI rose 0.4%, also above expectations. Money Markets now price a 27.5bps of tightening in December, implying a fully priced 25bps hike and a 10% probability of a 50bps move. Fed’s Logan added to the hawkish rhetoric, calling for at least two further 25bps hikes, while Schmid described current policy as fairly accommodative. Bowman, who was more dovish than peers, said there is still more work to do, but financial conditions have tightened and the Fed must weigh costs of additional policy tightening. US equities were lower, albeit closing off lows, with the NASDAQ 100 and Russell 2000 underperforming amid the hawkish Fed repricing. Nvidia (NVDA) extended its recent losses amid reports surrounding CEO Jensen Huang’s affair with an alleged Chinese spy. Sectors were mixed, with Technology lagging while Financials and Consumer Discretionary outperformed. Treasuries saw a sharp bear flattening as front-end yields led the move higher in response to Waller and US CPI. The 10-year Treasury auction was also notably weak, tailing by 1bp with a sharp decline in indirect participation, although it had little additional market impact. Crude was lower amid continued optimism surrounding US-Iran peace negotiations, although conflicting headlines prompted volatility. Further reports that Iran had agreed to reduce its highly enriched uranium levels initially weighed on prices, before Iranian Security Chief Rezaei disputed claims of ongoing negotiations and reiterated that the Strait of Hormuz would remain closed until Iran’s conditions were met. Qatar reportedly secured at least two weeks to pursue diplomatic efforts, although significant differences remain. The Dollar strengthened against all G10 peers, with the Japanese Yen and Swiss Franc pressured by widening rate differentials following the rise in US yields, while the Australian Dollar lagged amid weaker risk sentiment. Gold was also pressured on the firmer yield environment. US CPI was hotter than expected in October, with headline prices rising 0.4% M/M (0.350% to three decimal places), above the 0.3% forecast but cooling from the prior 0.649%. Shelter prices rose 0.3%, accounting for over 30% of the headline increase, while food prices increased 0.5% and energy prices rose 0.7%, slowing substantially from September’s 5.2% increase. Core CPI rose 0.3% M/M, above the 0.2% forecast and in line with the prior 0.3%. Within the core components, increases were seen in recreation, medical care, motor vehicle insurance, household furnishings and operations, and education, while used cars and trucks and communication were among the few major categories to decline. The hotter core print followed hawkish remarks from Fed Governor Waller earlier in the session, where the Governor said further policy tightening will be needed and that a 50bps hike in December may be warranted if October core CPI came in around 0.3% or higher. The combination of Waller’s comments and the inflation data has reignited discussion around the possibility of a larger December hike. Money markets now fully price a 25bps increase, with around a 10% probability of a 50bps move. This is the final CPI report ahead of the December 9th FOMC meeting, with November CPI not due until December 10th. However, policymakers will still receive October PPI on Friday and PCE data on November 25th. Pantheon Macroeconomics said the October CPI report appears consistent with a 0.35-0.40% M/M increase in core PCE and an acceleration in the annual core PCE rate to 3.3% from 3.1% in September. Elsewhere, Oil closed lower by 0.5% while Gold was hit hard ending Tuesday’s session with a loss of nearly 3%.
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For anyone following my Platinum Service it was flat yesterday and is still ahead by 536 points for November, after closing October with a gain of 3975 points after ending September with a nice gain of 7767 points, after ending the month of August with a gain of 2645 points after closing July with a gain of 8031 points, after ending June with a new record of 10527 points after ending May with a loss of 1104 points, having ended April with a gain of 1730 points, after ending March with a massive gain of 9002 points, having closed February with a strong gain of 5482 points after ending January with a gain of 4757 points, having closed December with a gain of 2599 points, after ending the month of November with a gain of 4542 points, after ending October with a nice gain of 5110 points after closing September with a gain of 3774 points while ending August with a gain of 3362 points after closing July with a gain of 3753 points after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a previous record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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