Broad equity gains and falling energy prices drive market sentiment as investors look toward today's US CPI print and a $42bn 10-year Treasury auction.
Brent tumbled to its lowest since early September and dropped further into the low $90s this morning as its geopolitical premium deflated on reports the US president agreed to an Iraqi proposal to end the war. Falling energy prices supported the risk-on mood. The decline rests partly on unconfirmed reports and the president has a record of talking prices down before resuming operations, so the move may prove fragile.
Sterling gained against the dollar, and Thursday's Q3 GDP figures are expected to come in strong, giving the pound an edge into next week's UK-EU summit on improved trade relations. BoE governor Bailey endorsed openness to closer market ties with the EU and others. Weak retail sales data (1.1% Y/Y, subdued October) is a partial counterweight.
The Nasdaq rose 2.74% yesterday with the SOX semiconductor index bouncing almost 7% as investors looked past the Nvidia case. Unlike Friday's move, the broad-based rally (423 of S&P500 stocks up) offers a stronger basis for further recovery, though today's CPI is the near-term test.
EUR/USD turned Friday's losses into gains, closing north of 1.12 as the greenback slid from 102.24 to 101.65 on the DXY despite rising US yields. However, today's CPI is expected to support the bottoming out of the US dollar after last Friday's strong payrolls, which argues against further euro upside.
Treasuries underperformed German bunds going into today's CPI with yields rising by up to 5 bps. The expected CPI figures (0.3% headline, 0.2% core) should support the bottoming out of the front end of the curve, and today's $42bn 10-year auction deserves attention.
Natural gas prices are testing €80/MWh as the geopolitical premium in energy fell substantially in recent days. The same caution applies as for oil, though: part of the decline is inspired by unconfirmed reports, so the downside move could reverse if tensions resume.
US equities posted a broad-based recovery yesterday, with the Nasdaq climbing 2.74% and the SOX semiconductor index jumping nearly 7%. Investors are now focused on today's CPI release, where headline inflation is expected to rise 0.3% and core by 0.2%, potentially supporting the US dollar and the front end of the yield curve.
The geopolitical premium has fallen substantially in recent days, helped by reports that the US president agreed to an Iraqi proposal to end the war, and Brent has tumbled to its lowest level since early September, trading into the low $90s.
Yes. The commentary warns the decline is partly based on unconfirmed reports, and the US president has previously talked the price down before resuming larger-scale operations, so the jury remains out.
Thursday's Q3 GDP figures are expected to come in strong and should give the pound an edge ahead of next week's UK-EU summit, while BoE governor Bailey endorsed expanding market openness toward the EU.
The Nasdaq rose 2.74% and the SOX semiconductor index bounced almost 7%, with 423 S&P500 companies closing higher in the first trading day of a holiday-shortened week.
Today's US CPI print, expected at 0.3% headline and 0.2% core, is anticipated to support the bottoming out of the US dollar after the strong payrolls report last Friday.
CPI figures are expected to support the bottoming out of the front end of the US yield curve, and the $42bn 10-year auction also deserves attention.
Prices are currently testing €80/MWh after the geopolitical premium fell substantially in recent days.