Greenback jumps; stocks, bonds dented by hot US inflation data
The dollar index, which tracks the US currency against six others, rises nearly 0.4%
[LONDON] The US dollar rallied, while Treasury yields shot higher and stock futures fell on Wednesday (Oct 14), after data showed consumer inflation picked up more quickly than expected in the world’s largest economy last month, firming up expectations for another rate rise as early as this month.
The Labor Department said its core consumer price index rose 0.3 per cent in September from August, versus economist expectations for a rise of 0.2 per cent.
On an annual basis, core CPI, which strips out food and energy prices, rose 2.6 per cent, above forecasts for a rise of 2.5 per cent, while the headline rate rose 3.7 per cent, above estimates for a rise of 3.6 per cent.
The dollar rose 0.3 per cent against a basket of currencies, while US two-year Treasury yields, which are most sensitive to shifts in expectations for inflation and monetary policy, leapt 7 basis points on the day to 4.872 per cent, from around 4.77 per cent earlier.
“While energy prices might be grabbing the headlines, today’s report suggests the inflation problem runs much deeper. A stronger-than-expected core inflation reading adds to mounting evidence that domestic price pressures are becoming more entrenched, rather than easing,” George Brown, senior economist at Schroders, said.
“Markets are right to assume that policy will need to become much more restrictive to return inflation to target. The question is whether the Fed is prepared to tighten as much as the inflation outlook demands.”
Money markets showed traders upped their bets on the chances of the Federal Reserve delivering another rate rise this month to around 47 per cent, from closer to 20 per cent prior to the data, while cementing the odds of an additional rise in December, according to LSEG data.
Dollar leaps
The dollar index, which tracks the US currency against six others, was up nearly 0.4 per cent, from having been up just 0.1 per cent earlier, not far from its highest since April 2025.
The euro dropped 0.4 per cent to US$1.115, while the pound fell 0.25 per cent to US$1.322.
S&P 500 futures reversed course, falling 0.25 per cent on the day, from having been up 0.1 per cent earlier, while those for the Nasdaq dropped 0.5 per cent.
More of Wall Street’s big banks reported earnings. They included Bank of America, which saw profits fall in the third quarter, and also Morgan Stanley, which beat expectations for its Q3 profit thanks to higher income from investment banking and strong equity trading.
US chip and artificial Intelligence-related shares fell in pre-market trading on Wall Street, suggesting another drop after the opening bell, while over in Europe, several large tech stocks were among the strongest performers, led by Dutch chip equipment maker ASML, whose shares rose 1.4 per cent after upbeat results.
Europe’s Stoxx 600 pared some of the day’s gains to last trade up 0.3 per cent, while the MSCI All-World index fell into negative territory, down 0.1 per cent on the day.
Sentiment was already fragile prior to the consumer data, given the renewed strength in oil prices following attacks on two vessels in the Strait of Hormuz and after Iranian officials told Reuters they were deploying new tactics to target ships, raising the risk of fresh disruption to energy supplies.
Brent crude futures, which are around their highest in nearly two weeks, were last up 0.2 per cent at nearly US$106 a barrel. REUTERS
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
