[US Market Conditions]Both stocks and bonds plummet, with CPI rising – US dollar in the low 150 yen range – Bloomberg

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In the US financial markets on the 13th, both stocks and bonds fell sharply. The US consumer price index (CPI) grew faster than market expectations in January, reminding us of the persistence of inflation.

Stock closing price change from previous business day S&P 500 stock index 4953.17-68.67-1.37% Dow Jones Industrial Average 38272.75-524.63-1.35% Nasdaq Composite Index 15655.60-286.95-1.80%

The S&P 500 fell below the milestone of 5,000, marking the steepest decline since September 2022 on a CPI release day. Selling in interest rate-sensitive stocks such as home construction and banks increased, and Tesla led the decline in mega-cap stocks. The Russell 2000 index, a measure of small-cap stocks, fell about 4%. The Chicago Board of Options Exchange’s (CBOE) Volatility Index (VIX), known as the fear index, recorded its biggest rise since October last year.

The recent CPI statistics disappointed investors, as the market had been expecting a rate cut within this year as upward pressure on prices receded. The results also seem to confirm the correctness of the judgment of financial authorities, including Federal Reserve Chairman Jerome Powell, who had emphasized a wait-and-see attitude.

In terms of CPI statistics, the rate of increase in both the overall and core index exceeded market expectations, and the core CPI index increased by 0.4% from the previous month, the highest growth rate in eight months.

US CPI, core index rises sharply for the first time in eight months – dampening expectations for interest rate cuts

As of mid-January, interest rate swaps tied to the U.S. Federal Open Market Committee (FOMC) had fully factored in interest rate cuts in May and a total of 175 basis points (bp, 0.01%) by the end of the year. . However, after the CPI announcement, the expected probability of a May rate cut fell to about 32%. The expected rate cut for the year is below 90 basis points.

Expectations for US interest rate cuts to be impacted by upward swing in CPI; expectations set before July are set back significantly

In response to the CPI’s upside, Greg Wilensky, head of U.S. Treasuries at Janus Henderson Investors, said, “Based on recent comments from the Fed and the employment data, the door to a March interest rate cut is effectively closed.” “The US Federal Reserve has now locked the door and lost the key.”

Much of the CPI upside is centered on a “noisy spike” in imputed rents (OER), said Tiffany Wilding of Pacific Investment Management (PIMCO). OER is the expected rent when a homeowner rents out their home. This will likely reverse, but the details of the data are consistent with the Fed having a “last mile problem” that could push back any U.S. interest rate cuts until mid-year or beyond, he said.

The unexpected acceleration in inflation will likely be less pronounced in the personal consumption expenditure (PCE) price index, which the Federal Reserve relies on as a benchmark, and could make it less alarming for officials looking for the right time to cut interest rates. Based on the latest CPI data, Morgan Stanley economists expect the PCE core index (excluding food and energy) to rise 0.29% in January, when it is released on the 29th.

us debt

US bond prices plummeted. Yields have soared, especially on short-term bonds, which are most sensitive to monetary policy, and have hit year-to-date highs across all maturities. In response to the upward movement in the CPI, expectations that the US interest rate will be cut before July have declined significantly.

Japanese government bond price change from previous business day (bp) U.S. 30-year bond yield 4.47%8.92.03% U.S. 10-year bond yield 4.32%14.13.37% U.S. 2-year bond yield 4.67%19.34.30% 16:00 ET 42 minutes

The CPI rise was a huge blow to bond investors, who have been waiting for interest rates to fall to recoup losses accumulated over the past two years.

The impact of the CPI was not limited to the United States. Eurex, the main exchange for German federal bond futures, experienced extreme instability immediately after the CPI announcement, and temporarily suspended trading in 5-year and 10-year bonds. German federal bonds began to decline, with yields at one point jumping 10 basis points from the low of 2.32% just before the CPI announcement.

But U.S. Treasuries remain attractive for “income and diversification” purposes, David Kelly, chief global strategist at JPMorgan Asset Management, said on Bloomberg Television. “Government bonds are not purchased for capital gains,” he said, adding, “Given that the inflation rate is slowing toward 2%, it is problematic that the 10-year bond yield is at the 4.25% level.” No,” he said.

money order

The dollar soars on the New York foreign exchange market. Following the CPI data, the Bloomberg Dollar Spot Index hit its highest level since mid-November last year.

Exchange Rate Last Business Day Change Rate Bloomberg Dollar Index 1250.247.930.64% USD/JPY ¥150.80 ¥1.450.97% EUR/USD $1.0710-$0.0062-0.58% 16:42 ET

The yen has fallen to the 150 yen level against the dollar for the first time in about three months. The rate of increase in both the overall and core CPI exceeded market expectations, giving momentum to yen selling and dollar buying.

At one point, the price fell 1% from the previous day to 150.89 yen, the lowest level since November 16 of last year (151.43 yen). The yen has depreciated by about 10 yen and the dollar has appreciated since the beginning of the year, when it was in the high 140 yen range.

Yen falls to the high 150 yen level against the dollar after US CPI announcement – growing wariness of intervention

In an interview at the TradeTech FX 2024 conference, Tom Nakamura, a portfolio manager at AGF, said, “If you remove the focus on the Bank of Japan’s policy actions, ultimately the dollar and yen tend to move in tandem with movements in U.S. bond yields.” “There is,” he said. He expects the yen to fall toward 160 yen against the dollar.

Valentin Marinov, head of G10 currency research and strategy at Credit Agricole CIB, said, “If financial conditions tighten further globally due to rising U.S. bond yields, there is a risk that risk sentiment will worsen, and The dollar, which is a safe-haven asset for the world, will see further tailwinds.” He said, “I can almost imagine Goldilocks closing the door and leaving.”

The yen hit an eight-and-a-half year low against the pound. Expectations for interest rate cuts have been revised due to the upside in the US CPI and strong UK wage data.

Sterling rises against yen to 190 yen level for the first time in eight and a half years – US and UK statistics revise expectations for interest rate cuts

crude

New York crude oil prices are rising. The market rose above an important level in technical analysis, as the Organization of the Petroleum Exporting Countries (OPEC) gave a bullish demand outlook. This level has served as the upper end of a narrow trading range since the beginning of this year.

West Texas Intermediate (WTI) closed near $78 a barrel, above its 200-day moving average of about $77.40. OPEC expects global oil demand to continue to grow strongly this year. Given that this forecast provided support for the bulls, a breakout above the 200-day moving average increases the chances that the market will gain further upward momentum.

OPEC varies in scale of implementation of new production cut agreement – report

On this day, CPI data showed the persistence of inflation, and risk-off sentiment spread across financial markets. Under these circumstances, crude oil prices rose.

“This is a rare day where we see a decoupling between oil and stocks,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “Inventories are expected to increase this week, which could limit the rise,” he said.

The March WTI futures contract on the New York Mercantile Exchange (NYMEX) ended at $77.87 per barrel, up 95 cents (1.2%) from the previous day. Brent April contract rose 0.9% to $82.77.

Money

Gold prices are falling. Spot prices have fallen below $2,000 per ounce for the first time since December last year. The higher-than-expected U.S. CPI has dampened hopes that the central bank will start cutting interest rates soon.

U.S. Treasury yields and the dollar soared in response to the CPI data, and the spot gold price briefly fell 1.5% to $1,990.21 per ounce. This is the lowest intraday price in two months.

“There is nothing in these inflation numbers or other recent U.S. economic data that would move the Fed to cut rates in the near term,” said Nikki Shields, head of metals strategy at MKS PAMP. He said: “The pace of the ‘last mile’ of disinflation has clearly slowed, supporting the authorities’ wait-and-see approach.”

As of 2:29 pm New York time, the spot gold price was $1,991.87 per ounce, down $28.18 (1.4%) from the previous day. New York Mercantile Exchange (COMEX) gold futures for April contract fell $25.80, or 1.3%, to close at $2007.20.

Original title:Markets Jolted as Fed’s ‘Last Mile’ Looks Elusive: Markets Wrap

　　　Traders Pull Back Bets on Fed Interest-Rate Cuts Before July

　　　Dollar Jumps to Near Three-Month High After CPI: Inside G-10

　　　Oil Rises as OPEC Demand Outlook Aids Push Past Technical Level

　　　Gold Dips Below $2,000 as Traders Reduce Fed Cut Bets After CPI（抜粋）