Equities Bid Following Soft US Inflation Numbers

Year on year, US consumer price inflation cooled more than expected at 3.2% in the twelve months to October, comfortably south of the 3.7% print in September (and below the market’s median estimate of 3.3%). For the same period, the core measure—excludes energy and food components—also eased to 4.0%, below 4.1% in September (consensus: 4.1%).

From September to October, inflation came in flat (0.0%) against the 0.4% reading in September (estimate: 0.1%), while core inflation slowed to 0.2% on a month-on-month basis, down from 0.3% (estimate: 0.3%). According to the US Bureau of Labor Statistics (BLS), gasoline prices were lower, down -5.3% in October compared to the year prior and lower from September to October.

Fed Likely to Remain on Hold

This will likely help seal the deal for December’s FOMC meeting; market pricing shows a 95% chance that the Fed will keep the Fed Funds target rate on hold at 5.25%-5.50% (22-year peak). Markets are also fully pricing in the possibility of a 25bp rate cut in mid-2024.

S&P 500

The Dollar Index was pummelled following the release, down 1.2%, as we write. This was seen alongside US Treasury yields falling sharply. US cash equity markets gapped strongly higher at the open; the S&P 500 is up +2.0% as of writing. This, given daily price has all but cleared offers from resistance at 4,473, has thrown light on a continuation rally towards weekly resistance at 4,595, a whisker south of July’s high at 4,607. Consequently, any correction could unearth dip-buying possibilities, particularly if the index retests the breached daily support.

Charts: TradingView

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