The screens were tinted green. It is that a slowdown in the increase in prices could make the Federal Reserve less aggressive in its rate increase policy, an element that today also fuels expectations of a recession in the northern country.
In the Bag of New York, the Dow Jones advanced 3.11% during the day and the S&P 500 grew 4.58%. Meanwhile, the technological Nasdaq Composite expanded up to 6.1% and with a general rise that has not been registered since 2020.
For its part, the yield on the US Treasury bond fell from 4.1% to 3.87%. Meanwhile, the yield on this two-year bond, which more closely tracks expectations for Fed action, fell from 4.58% to 4.32%, according to Investing data.
The expectations
“The best news is that the core rate has finally fallen, which has not fallen since July. It stood at 6.3%,” wrote the economist Paula Bujia in a report published by GastĂłn Bengochea Corredor de Bolsa to which she accessed The Observer.
“Clearly, a very good data but we are going to put some cold cloths to an excess of optimism. An inflation of 7.7% is better than expected but still far from the Fed’s 2% target. And in Powell’s speech last week, it was clear that they need clear and sustained evidence, with what is now a good start,” Bujia wrote.
The economist Aldo Lema pointed out that since the high CPI for September in the US was released (at the beginning of October), when analyzes of uncontrolled inflation abounded, the New York Stock Exchange rose nearly 10%. “Investors are discounting a disinflationary slowdown, without a hard landing,” he wrote on his Twitter account.
The Consumer Price Index (CPI) of the United States had an increase of 0.4% last month, compared to the previous period and positioned year-on-year inflation at 7.7% from a previous 8.2% in September. This is lower than the market forecast, since it was thought that it would increase monthly by 0.6% and reach 7.9%.
“The market reaction has been swift and aggressive, with some interpreting a lower CPI surprise to mean the Fed’s job is almost done. However, the Fed won’t want to point this out just yet, as it will contribute to an easing of financial conditions that could undermine all the hard work of trying to contain inflation.”ING’s chief international economist, James Knightley, wrote in a note, according to Diario Financiero.
With these data, bets increased that the Federal Reserve will raise the reference rate by 50 bp -instead of 75 bp- at their next meeting in December. Following the CPI news, investors expected the Fed to hit a terminal rate of around 4.9%, based on futures market returns. On Wednesday, the forecast was that the terminal rate would be above 5%.
For its part, in Europe, the regional Stoxx 600 grew 2.8%, the FTSE 100 in London gained 1.07%, the CAC 40 in Paris added 1.96%, the DAX in Frankfurt expanded 3.15% and the IBEX 35 in Madrid rose 1.15%.
dollar and oil
After the new data, andl Dollar Index which measures the value of the US dollar against a basket of foreign currencies fell 1.83% to 108.54 units. This, together with expectations of a moderation in rate hikes, contributed to a slight rise in oil prices. The price of a barrel Brent recovered ground to US$94. The price of gold also gained ground, reaching above US$1,750 an ounce.
Also In Uruguay, the dollar traded lower and stood at $40.06 in the wholesale average, 0.12% less than Wednesday’s session, according to data from Bevsa.
The Observer and agencies
