Inflation Remains the Paramount Market Driver
September 14, 2022
U.S. equities on Tuesday experienced their largest selloff in two years, triggered by a disappoint consumer price report that showed the U.S. core inflation rate jump 0.4 percentage points to 6.3%, food price inflation of 11.4% (most since 1976), and a higher-than-forecast 12-month increase in total CPI inflation of 8.1%.
The move out of riskier assets yesterday extended into overnight trading in the Pacific Rim, with Japan’s Nikkei closing down 2.8% and share prices falling 2.6% in Australia, 2.5% in Hong Kong, 1.6% in Taiwan and South Korea, 1.0% in Singapore and 0.8% in China. The British Ftse and German Dax have so far lost 1.5% and 1.1% today. U.S. stock futures have recovered only marginally in pre-open hours.
Ten-year sovereign debt yields are up 5, 4, 2, and 1 basis points in the U.S., Germany, U.K. and Japan. U.S. stock futures have recovered only marginally in pre-open trading.
The price of Bitcoin has reversed only 0.5% of a nearly 10% tumble yesterday. Gold and oil are down 0.2%.
Despite settling back 0.3% from Tuesday’s closing level, the DXY weighted dollar index is still 1.6% stronger than yesterday’s intra-day low prior to the CPI report. Compared to Tuesday closing levels, the dollar is off 1.1% versus the yen, 0.3% versus the euro, and 0.6% vis-a-vis sterling but remains unchanged against the Swiss franc.
Today’s U.S. August producer price release revealed an as-expected 0.1% monthly dip and a lower 8.7% on-year increase, the smallest such gain since August 2021 and four percentage points below the 2022 high-water mark, but the Fed’s hands are still tied. Aggressive additional monetary restraint will be necessary. Meanwhile, separate U.S. data reported today confirmed a fifth straight drop in mortgage applications last week, this time by 1.2%, and the first time that the 30-year fixed mortgage rate has exceeded 6.0% since 2008. That twice as high as such were a year ago.
Disheartening inflation news have been also reported by several other countries today.
Swedish consumer prices jumped 1.8% on month in August, lifting that economy’s inflation rate to a 374-month high of 9.8% versus 8.5% in July and just 2.1% in August 2021. Core CPI in Sweden rose a full percentage point to 9.0% last month.
While British CPI inflation receded 0.2 percentage points in August, the 9.9% pace was three times greater than the 3.2% recorded in August 2021, and core CPI inflation edged up further to 6.3% in the latest month. British producer output and producer input inflation subsided in August, too, but remained extremely elevated at 16.1% and 20.5%.
Finnish CPI inflation of 7.6% in August was only slightly below the 456-month high of 7.8% in June and July and up from 2.2% in August 2021.
Indian wholesale price inflation of 12.4% last month represented a 10-month low but revealed further acceleration in the food component to 12.37% from 10.77% in July and 3.43% in August 2021.
A 2.3% plunge in Euroland industrial production in July was more than twice the expected decrease, reversing the combined increase of three straight advances during the second quarter, and resulting in a 2.4% drop compared to the July 2021 level.
The rise in Japanese industrial production during July was revised slightly lower to 0.8% and associated with a year-on-year decline of 2.0%. Industrial capacity and capacity utilization in July were 1.3% and 1.9% less than their year-earlier levels.
Greek unemployment increased 0.3 percentage points to a 2-month high of 12.6% in July.
South African retail sales dipped 0.1% in July but were 8.6% greater than a year earlier.
Factory output in Hong Kong rose 5.3% on month and 2.7% on year during the second quarter.
New Zealand recorded an eighth consecutive quarterly current account deficit in the second quarter, which at NZD 5.22 billion was 3.1 times larger than the deficit in the second quarter of 2021.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British and Swedish consumer prices, Euroland industrial production, Indian WPI, U.S. CPI and PPI
ShareThis
