Key US Inflation Measure Ticks Higher for First Time Since March

Economic

Central Bank

Summary:

The consumer price index rose at annual pace of 2.6% after September saw lowest rate in more than three years

A key measure of US inflation has risen for the first time since March, underlining its bumpy ride down to lower levels.

The consumer price index (CPI), which measures price growth across a basket of goods, ticked up to an annual pace of 2.6% in October – from 2.4% in September, which had been the slowest rate in more than three years. Key US Inflation Measure Ticks Higher for First Time Since March_1

Key US Inflation Measure Ticks Higher for First Time Since March_1

Stripping out volatile food and energy costs, the closely watched “core” inflation index held firm at 3.3%. The reading was in line with economists’ expectations.

Though inflation has fallen dramatically since peaking at a four-decade high in summer 2022, many Americans are still under pressure after years of price increases.

Frustration over the cost of living appeared to play a major role in the election, with exit polls indicating that the majority of Republican voters were frustrated with the US economy and their financial situation.

On the campaign trail, Donald Trump proffered tax cuts and tariffs as solutions, but questions have been raised about what such policies will actually mean for inflation.

The president-elect has pledged to enact tariffs of at least 10% on all US imports, a policy that many economists say would probably lead to inflation going up as much as 5.1%, according to the Budget Lab at Yale.

The Federal Reserve cut interest rates for the first time in four years in September, a key turning point in its battle to bring down inflation. It lowered rates again last week, to their lowest level since February 2023.

At a press conference, the Fed chair, Jerome Powell, said the central bank “has gained confidence that we’re on a sustainable path down to 2%”, its target for inflation, but added: “The job’s not done.”

The Fed has been trying to carry out its “dual mandate”, managing price increases without triggering higher rates of unemployment.

The labor market has slowed significantly over the last few months, with the US adding just 12,000 jobs in October. After hitting a low of 3.4% in February 2023, the unemployment rate in October was 4.1% – still a low rate, comparable with pre-pandemic levels.

When asked whether the outcome of the election affects the Fed’s decision on interest rates, Powell said officials “don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy would be.”

Source: TheGuardian

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ING

Economic

Some relief from consensus US CPI reading, but still too high

The market was clearly concerned that the US CPI numbers might have been worse, as evidenced by the drop in yields following a broadly consensus outcome (though slightly different from the whisper number).

Nonetheless, the 3.3% year-on-year core CPI remains an ongoing discussion point, as it is still too high. Federal Reserve Chair Jerome Powell referenced this at last week’s press conference. Despite this, the front end of the curve moved lower as markets perceived more room for potential Fed rate cuts if deemed necessary.

We want to be a tad bullish on USTs due to the Trump-induced backup in rates, which is now significant. But we need a catalyst first. Yesterday's number was a relief as it could have been worse. Historically, we’ve never seen a rate-cutting cycle where the 10-year yield consistently rose after the first cut. Some increase is expected, but not a persistent one like we’re seeing now. We understand the reasons behind this, but it still feels like yields could move back down for a while.

The front end in particular looks to have value. We struggle to understand why it’s persistently drifting higher unless the market is pricing in rate hikes in 2026. Not impossible of course. But quite a leap to discount that now.

Euro rates looking at US and ECB speakers for direction

Euro rates changed slightly on the day but found some relief in the consensus US CPI numbers. With little eurozone macro data to work with and Trump-related risks moving to the background for now, we expect the correlation with US rates to remain strong.

Perhaps European Central Bank speakers can give some direction by sharing insights on the chances of a 50bp cut in the near future. For now markets price in a 20% chance of a 50bp cut in December, which seems reasonable given the rising growth risks. Having said that, more signs of economic weakness are needed to move that needle towards a higher probability.

Bund spreads over swaps remain in a precarious situations

Wednesday saw another day of noticeable Bund underperformance relative to swaps. The 10y yield rose to 4bp above swaps but retreated from the 5bp level it briefly reached last week. Last week, we suggested that some stabilisation might be possible based on historical levels versus OIS. We are now largely back to pre-QE levels, which were around 20bp above OIS in 2014 (on an ESTR-adjusted basis), compared to the 17.5bp peak seen in recent days. However, it is important to emphasise that, overall, we see few reasons for Bunds to outperform swaps again.

One issue that markets will have to weigh is how any new government in Germany will handle the debt brake, and for now there are good cases to be made for more spending to tackle Germany’s investment backlog and structural issues. In the end, Germany may well be one of the countries that can afford such spending. Stabilising at around current levels looks possible, but in terms of market sentiment and other structural as well as cyclical factors playing into the Bund spread, the risks of more underperformance versus swaps seem more obvious than those for outperformance.

10y Bund spreads versus OIS are back to pre-QE territory

Source: Refinitiv, ING

Thursday’s events and market views

US PPI numbers are scheduled for release, and since they influence the PCE reading in two weeks, markets will be sensitive to any surprises. With core CPI running hot, a softer PCE reading of 0.2% (as currently expected) would be welcomed. Additionally, US jobless claims might attract attention as the focus on the labour market increases. In the eurozone, we will see the second GDP estimates for the third quarter and industrial production figures for September. The ECB will also release the minutes of the October meeting. Central bank speakers include the ECB’s Schnabel, the Fed’s Powell, and the Bank of England's Bailey.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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ACY

Economic

The Australian Dollar (AUD) is currently under pressure as investor sentiment cools toward riskier assets, a shift largely tied to developments in U.S. politics and domestic economic indicators. Recently, reports about U.S. President-elect Donald Trump’s cabinet selections, specifically for roles like the U.S. Trade Representative, Secretary of State, and National Security Advisor, have amplified market concerns. These officials, known for their protectionist stances and scepticism toward China, have added a cautious undertone in markets, causing a shift away from the previous "risk-on" rally that had been bolstering AUD/USD.

AUD’s Sensitivity to U.S. Policy and Global Trade Tensions_1

Despite these headwinds, Australian interest rates have provided a degree of support for the AUD. The Reserve Bank of Australia (RBA) has indicated a more conservative stance on rate cuts, suggesting none are expected until the New Year. Currently, market pricing reflects a modest expectation of future rate cuts by the RBA, anticipating under 40 basis points in reductions within the next year. However, recent wage data from Australia fell short of expectations, eroding some support for the AUD. Annual wage growth slowed more than expected, a likely result of a lower minimum wage increase in 2024 compared to the previous year. Quarterly wage growth remained stable, although year-on-year growth dipped to 3.5%—a gradual decline from last year’s 4.1% rate.

AUD’s Sensitivity to U.S. Policy and Global Trade Tensions_2

Australia’s tight labour market has maintained wage growth at elevated levels, even as productivity growth remains low. Retail sales data suggest that Australian households are being cautious with their disposable income, preferring to save rather than spend the benefits from recent tax cuts and utility rebates. Combined with softer wage growth, this data indicates that the RBA may lean toward further rate cuts in the future. Yet, the slight decrease in wage growth aligns with the RBA’s projections of a 3.4% annual wage growth for the second half of 2024, which should not significantly alter its rate policy.

Looking forward, while overall economic growth has slowed, employment figures have been surprisingly resilient, with job advertisements remaining robust and the unemployment rate hovering near the estimated natural level of 4%. Should employment growth continue to outpace expectations, it could complicate the RBA’s balancing act as it evaluates the timing and necessity of rate cuts.

To stay updated on all economic events of today, please check out our Economic calendar

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Warren Takunda

Stocks

Shares were mixed in Asia on Thursday after a lackluster finish on Wall Street following a report showing an uptick last month in inflation in the U.S.

The dollar was trading at 156 Japanese yen, up from 155.49 yen, reflecting expectations that the dollar will gain against other currencies under the policies anticipated with the incoming administration of President-elect Donald Trump.

Japan’s Nikkei 225 index edged less than 0.1% higher, to 38,754.50 and the Kospi in South Korea advanced 0.5% to 2,429.23. Australia’s S&P/ASX 200 gained 0.4% to 8,223.20.

Chinese markets declined, with the Hang Seng in Hong Kong falling 0.9% to 19,649.91. The Shanghai Composite index lost 0.3% to 3,428.37.

Bangkok’s SET lost 0.2% and Taiwan’s Taiex fell 0.5%, while the Sensex in India edged 0.1% higher.

A stronger dollar tends to put strain on other economies, noted Stephen Innes of Capital Economics. The Thai baht has also weakened against the dollar since the U.S. election, as has the Chinese yuan, or renminbi, which now stands at 7.2245 per dollar and was trading at about 7 yuan per dollar in early October.

“For Asia, particularly those economies closely linked to China, the dollar’s dominance is poised to become an economic wrecking ball,” he said in a commentary. “Countries with hefty USD-denominated debt are bracing for impact,” he added.

On Wednesday, U.S. stocks drifted to a mixed finish after the latest inflation update boosted hopes that a cut to interest rates next month will bring more help for the economy.

The S&P 500 was nearly unchanged, gaining 1.39 points to 5,985.38, up less than 0.1%. It was its first loss since a big rally erupted after the Nov. 5 Election Day. The Dow Jones Industrial Average added 0.1% to 43,958.19, and the Nasdaq composite slipped 0.3% to 19,230.74.

U.S. consumer inflation accelerated in October to 2.6% from 2.4%, but an underlying measure called “core inflation” did not rise. Such core inflation can be a better predictor of future trends, economists say, so the figures added to expectations for more help from the Federal Reserve.

The Fed began cutting interest rates from their two-decade high in September to keep the job market hummin g after bringing inflation nearly all the way down to its target of 2%. It cut again earlier this month, and traders now see an improved probability of roughly 80% for a third cut at its meeting next month, according to data from CME Group.

Those expectations sent the yield for the two-year Treasury down to 4.27% from 4.34% late Tuesday. The yield on the 10-year Treasury, which also takes future economic growth more into account, rose to 4.45%, up from 4.43% late Tuesday.

But T rump’s victory in the presidential election has raised uncertainty over the Fed’s future course. Economists say his preferences for lower tax rates, higher tariffs and less regulation could ultimately lead to higher U.S. government debt and inflation, but also bring faster economic growth.

While lower interest rates can give a boost to the economy and to prices for investments, they can also fuel inflation.

Rivian Automotive jumped 13.7% after the electric-vehicle company gave more details about a joint venture it’s entering with Volkswagen Group that they had previously announced. The deal’s total size could be worth up to $5.8 billion, which is more than the $5 billion the companies had previously said.

Spirit Airlines’ stock lost 59.3% after it said in a regulatory filing that it’s trying to work out a deal to renegotiate the repayment of its debt that might wipe out the company’s stockholders, but could protect employees and customers.

In the crypto market, bitcoin was tracing at $90,300 after crossing above $93,000 as cryptocurrencies generally soared. Trump has embraced cryptocurrencies, pledging to make the U.S. the crypto capital of the world.

Dogecoin, a cryptocurrency that’s been a favorite of Tesla’s Elon Musk, also gave up some of its gain from earlier in the day. Trump named Musk as one of the heads of a “Department of Government Efficiency,” or DOGE for short.

In other dealings early Thursday, U.S. benchmark crude oil shed 37 cents to $68.06 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, gave up 29 cents to $71.99 per barrel.

The euro fell to $1.0548 from $1.0587.

Source: AP

Risk Warnings and Disclaimers

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SAXO

Economic

As Trump’s policy stance takes shape, one thing is clear: tariffs are emerging as the top priority, signaling a potential for intensified trade frictions even before tax cuts come into play. This shift has far-reaching implications for equities, bonds, and currency markets. Here’s how investors can tactically position their portfolios in response to the new Trump playbook.

First, let’s understand the nuanced impacts of Trump’s policies that are likely to have the largest impact across asset classes.

Tariffs: Inflationary, but Growth-Negative

Trade war scenarios usually create heightened market volatility as the trade agenda escalates, which could weigh heavily on certain sectors and regions that are most exposed to tariff risks.

Market Implications

Equities: The focus on tariffs is generally risk-negative, hitting growth, corporate profits, and especially sectors reliant on global supply chains.

US Stocks: High-beta sectors and small caps (e.g., Russell 2000) are particularly vulnerable, as they’re more exposed to supply chain disruptions. Defensive sectors such as Consumer Staples, Health Care, Utilities and select retailers with less exposure to offshore production could be relatively more resilient.

International Markets: Expect outsized impacts on China/HK equities, given the direct trade exposure, along with broader weakness in Asia and other China proxies such as Europe and Australia.

Bonds: While tariffs may create some inflationary pressures, the impact on growth could offset this, supporting bonds with a possible flattening yield curve.

FX: The USD may benefit as a “safe haven” currency, while high-beta and cyclical currencies like EUR, CNH, AUD and MXN could weaken under trade pressure.

Tax Cuts: Pro-Growth and Inflationary

When implemented, tax cuts could boost domestic growth, benefiting US-centric sectors over globally exposed ones. The likely beneficiaries are small-cap and cyclically sensitive companies that stand to gain from a tax burden reduction.

Market Implications

Equities: Small-cap stocks (like those in the Russell 2000) and cyclicals could see a lift from tax cuts, but this may be tempered by broader trade and fiscal risks.

Bonds: Although tax cuts might nudge yields up, growth uncertainties related to tariffs could counter this effect.

FX: A tax-driven boost to US growth would support the USD, particularly as other economies grapple with trade-related slowdowns.

Deregulation: Less Macro, More Sectoral Impacts

Trump’s administration is also signaling a renewed focus on deregulation, which could act as a pro-business catalyst across various sectors. Deregulation is expected to streamline operations for industries like energy, finance, and manufacturing, reducing costs and potentially boosting domestic growth. However, while deregulation generally supports the business environment, its effects are nuanced across asset classes, particularly when considered alongside the ongoing tariff emphasis.

Market Implications

Equities: Deregulation is generally positive for US equities, especially in sectors like energy, financial services, and manufacturing where compliance costs have historically been high. These sectors could see operational efficiencies and improved profitability as regulatory burdens ease.

Energy: Oil and gas companies may benefit from environmental deregulation, while the clean energy sector could suffer if clean-energy tax credits are rolled back.

Financials: Banks and financial services may find more flexibility in lending, capital requirements, and investment activities, which could improve their bottom lines.

Bonds: The growth stimulus from deregulation may place modest upward pressure on bond yields if it results in higher corporate profitability and economic output.

FX: The deregulation-driven growth narrative does reinforce positive USD sentiment over the medium term amid a reduced need for Fed to cut rates.

Tariff Policy Sees Urgency

Tax policy can often take longer to take shape as it needs a congressional approval. There are likely to be some members who could be concerned about the record-high debt and deficits, and in effect, the tax-policy changes that are eventually enacted could be somewhat tempered compared to campaign promises.

Trade and tariff policies in the US, meanwhile, can often be influenced and sometimes directly implemented by executive order.

In summary, investors should approach equities with caution, as tariff headlines are likely to be risk-negative in the near term, potentially outweighing the positive impact of tax cuts. However, regardless of the outcome, the US dollar stands to benefit from multiple supporting factors, including Trump’s tariff policies, fiscal measures, Fed actions, and geopolitical risks. This dynamic explains the continued strength in the USD, even as US equities struggle to break new highs. The dollar’s resilience is expected to persist, making it a key beneficiary of the current macroeconomic environment.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Pepperstone

Economic

As many who have traded Nvidia’s prior earnings will attest, earnings are historically where big moves play out on the day, with the AI-giant influencing sentiment towards the broader semiconductor space, as well having a big effect on the NAS100 and S&P500.

Key timings: Nvidia report after-market on 20 November (20 Nov at 21:20 GMT / 21 Nov 08:20 AEDT)

Nvidia options imply another big move on earnings

While pricing is dynamic and may well change by Wednesday, Nvidia options currently imply an -/+8% move on the day of earnings. This is clearly a punchy implied move for any stock, let alone one with a $3.6t market cap.

Nvidia Q325 Earnings Preview: AI Trends, Market Expectations, and Trading Opportunities_1

Guiding expectation for the implied move is the form guide, where we can see that Nvidia has seen average (absolute) moves on the day of reporting quarterly earnings of 9.3%.

Such elevated levels of expected movement can be a drawcard for traders who are attracted to sizeable intraday moves in equity and want the liquidity that is seen in Nvidia’s order book.

Large implied moves are also a major consideration for one’s risk management and when assessing position sizing and the distance to the stop loss.

Reviewing Consensus Market Expectations

The extent of the rally/sell-off is typically a function of the outcome of earnings, and the guidance for the following reporting quarter, relative to market expectations and positioning.

For this reporting quarter (Q325), the analysts’ consensus expectations (shown below) are largely in line with the guidance Nvidia provided in the prior Q225 earnings report (seen on 28 August).

Nvidia Q325 Earnings Preview: AI Trends, Market Expectations, and Trading Opportunities_2

For example, we see expectations for Nvidia’s group revenue at $33.08b, just 2% above the guidance provided in the Q225 earnings. The market then expects guidance for the next reporting quarter (Q425) of $36.77b, representing a potential increase of 11% q/q, with the data centres segment representing the large percentage of those sales.

Nvidia has such an incredible pedigree in beating their own guidance (and consensus expectations) on sales and earnings that traders have become conditioned to blockbuster numbers, which always beat – subsequently, market participants historically position for better-than-expected numbers and that raises the bar even further.

Reduced expectations for a significant beat to consensus expectations

In this earnings report, expectations are set lower than in past reports, and forecasts from analysts and investor positioning sit at the lowest premium to prior company guidance for many years. In theory, this newfound confidence to model and forecast sales, margins and earnings suggests the real potential for Nvidia to deliver an upside surprise, which could promote a significant move in the share price.

Of course, the company guidance for the following reporting quarter (i.e. Q425) will also determine the extent of move in Nvidia’s share price on the day. The market lives in the future, so the collective will want new intel that suggests that sales growth is not just on track but could be higher than consensus forecasts.

Focus will also fall on CEO Jensen Huang views in the post earnings call, where he’ll offer his take on how the business is tracking, the rollout of Blackwell and other GPUs and new developments in the pipeline. Huang will no doubt be incredibly positive and upbeat, and there are few CEO’s who know how to hit the right notes with investors.

The market wants clarity on the direction of margins

Q325 gross margins are expected to drop to 75.01% and are expected to continue falling towards 73% over the next two quarters. These are still obviously incredibly healthy margins for any business, but the market is now well conditioned to such impressive margins that the investment case resides on its ability to sustain these margins and offset any deterioration with increased volumes.

The jury is out on whether margins are in longer-term decline or due to rise once again. A more stringent regulatory response is a potential landmine and one that is hard to model. Competition is also likely to increase, which could impact margins as the AI giant may need to become more competitive in its pricing.

Conversely, the supply constraints that have held sales of Blackwell GPUs back will soon ease and should result in stronger sales growth in the quarters ahead. It could also see margins pushing back towards 75% in the Q226 results. Either way, the fact Nvidia currently trades at ATHs, despite greater attention on US election expressions, shows the broad collective still love the story and view Nvidia as the best-in-class AI/semi play.

Put Nvidia 24-hour CFD on the radar

Traders can pre-position for Nvidia’s earnings and react dynamically to the news or the price action through Pepperstone’s Nvidia 24-hour CFDs. 24-hour CFDs offer around-the-clock pricing (5 days a week) for traders to take a position and manage exposures before, through and after Nvidia’s earnings.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Justin

Economic

Energy

LIMA, Peru (Nov 13): Malaysia’s Prime Minister Datuk Seri Anwar Ibrahim on Wednesday stressed the importance of strengthening ties with the Global South, highlighting the vast untapped potential and emerging opportunities in this region.

“It’s crucial to shift course slightly and enhance collaboration with the Global South, tapping into the vast new potentials and opportunities,” he said in his opening remarks during the roundtable with captains of industry from Malaysia and Peru here on Wednesday.

The prime minister is here for his official visit and also participation in the Apec Economic Leaders Week (AELW). Also present were Malaysia’s Foreign Minister Datuk Seri Mohamad Hasan, and the country’s Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Aziz.

Anwar, who is also finance minister, said that historically, the focus has been on a narrow set of partners, but the changing global dynamics present a compelling case for broadening the horizons and diversifying alliances.

He reiterated that while the United States remains Malaysia’s top investor, Putrajaya also has strong trading partnerships with China, “and we are collaborating effectively in multiple areas. That is the way forward”.

“We should not be dictated to by anyone; instead, we must be guided by what is best for our country, as determined by our own people.

“I believe Malaysia and Peru share the same perspective. We need to remain open and neutral. In Asean, we call it centrality,” he said.

Anwar said both countries share several major concerns, as both the countries are multiracial, and are working to bring about change and transitions within their respective nations.

“Peru has policies on energy transition, environmental transition, and multilateralism, as well as investment, trade, governance, and anti-corruption efforts.”

“All these areas are critical, and I express that now is the time to take concrete actions,” he said.

He said alignment of some of the policies between Malaysia and Peru are encouraged, as both countries are members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

“We are now closely linked through Asean and the Asia Pacific Economic Cooperation (Apec).”

Meanwhile, Anwar also launched Yinson Holdings Bhd’s (KL:YINSON) Matarani Solar Park in Peru.

Yinson Renewables has completed the acquisition of the 97 MWp Matarani Solar Project in Peru from Grenergy Renewables, an international independent power producer, developer, and engineering, procurement, and construction company, with a strong track record in Latin America.

The project is located in the Mollendo desert in the Arequipa region, one of the world’s highest solar irradiation areas.

Most of the project’s energy has been contracted through a power purchase agreement with a bankable offtaker for the next 15 years.

Project Matarani had recently entered commercial operation, injecting about 260 gigawatt hours (GWh) of renewable energy into the Peruvian grid annually, enough to satisfy the energy needs of about 62,000 Peruvian households, and prevent the emission of more than 56,000 tonnes of carbon dioxide per year.

Source: Theedgemarkets

To stay updated on all economic events of today, please check out our Economic calendar

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Key US Inflation Measure Ticks Higher for First Time Since March

Source: TheGuardian

Rates Spark: Markets Relieved By Consensus US CPI

Some relief from consensus US CPI reading, but still too high

Euro rates looking at US and ECB speakers for direction

Bund spreads over swaps remain in a precarious situations

Source: Refinitiv, ING

Thursday’s events and market views

AUD’s Sensitivity to U.S. Policy and Global Trade Tensions

Stock Market Today: Asian Shares Meander, Tracking Wall Street’s Mixed Finish as Dollar Surges

Source: AP

Trump 2.0 is Getting Nuanced: Tariffs First, Tax Cuts Later

Tariffs: Inflationary, but Growth-Negative

Market Implications

Tax Cuts: Pro-Growth and Inflationary

Market Implications

Deregulation: Less Macro, More Sectoral Impacts

Market Implications

Tariff Policy Sees Urgency

Nvidia Q325 Earnings Preview: AI Trends, Market Expectations, and Trading Opportunities

Nvidia options imply another big move on earnings

Reviewing Consensus Market Expectations

Anwar Calls For Robust Collab With Global South To Tap New Potentials, Launches Yinson’s Solar Park

Source: Theedgemarkets

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