Marketmind: No escaping the inflation beast

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A look at the day ahead from Dhara Ranasinghe.

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No matter where you look these days, that long-sleeping animal – inflation – is clearly awake.

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China’s factory gate prices rose at their fastest pace on record in September, a day after another solid rise in US consumer prices showed data from Thursday.

The take away from the markets is that transitory or not, central banks are likely to respond to high inflation sooner rather than later.

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And with the minutes of the Federal Reserve meeting last month showing policymakers’ growing concern about inflation, investors have again pushed for rate-hike expectations.

Fed funds futures have outpaced expectations for the first hike since the end of 2022 and almost completely outpaced the hike by about 25 basis points by September.

Furthermore, money market pricing suggests the Bank of England may move ahead before the end of the year, the cautious European Central Bank may tighten next year and the over-enthusiastic Reserve Bank of Australia may raise rates through the end of 2023. – A trajectory that does not prison with the guidance of the central bank.

Singapore’s central bank unexpectedly tightened monetary policy on Thursday, citing high inflation forecasts.

Markets, with high inflation prices and a tighter monetary policy outlook, appear to be in a calm mood in early Europe. Asian shares rose overnight, European and US stock futures were also higher. The US Treasury yield, while a touch higher, is below recent multi-month highs.

Still, China’s asset shares declined as investors worried about a debt crisis in the region.

The Turkish lira also hit a record low against the dollar after Turkish President Tayyip Erdogan sacked three central bank officials.

Key developments that should provide more direction to the markets on Thursday:

– BOJ policy maker denies stimulus withdrawal even after economy recovers

– Taiwan’s TSMC posts 13.8% growth in Q3 profit on growth in global chip demand

Japan dissolves parliament, sets stage for general election

– Data: Spain reconciled inflation rate (September), Canada manufacturing sales (August)

– United States: Initial Jobless Claims (October), Jobless Claims 4-Week Average, PPI (September), NY Fed Treasury Purchase 22.5 to 30 Years, 4-Week and 8-Week T-Bill Auctions

– Central Banks: The Fed’s Bowman, Bostick, Barkin, Bullard, Daly and Harker, the ECB’s Alderson, and the BoE’s Tenrero and Mann speak

– Earnings: UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp, Walgreens Boots Alliance, Fast Retailing, Domino’s Pizza.

China’s factory gate inflation rises again
Reporting by Dhara Ranasinghe Editing by Rachel Armstrong


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