Daily Market Color

Risk Assets Decline While Inflation Data Beats Estimates

After being flat in the month of July, consumer prices in the US rose 0.2% in August, beating the forecasted increase of 0.1%.  Core CPI also came in 0.1% higher than expectations, reported at 0.3%, with the rise mainly attributed to housing rentals and healthcare costs.  While market consensus still expects the Fed to have held interest rates steady when they announce the results of the meeting next Wednesday Sep. 21, the CPI figures do add strength to the probability of a rate hike at one of the two remaining FOMC meetings before year end.  Despite the positive data, US equities are mostly trading lower, dragged down principally by financial and energy stocks.  Large banks saw their share prices fall today after Deutsche Bank reported that the Department of Justice was seeking a $14 billion settlement for investigations related to mortgage securities, while oil continues to tumble amid over-supply concerns.  Additionally, US Treasury prices are mostly falling on the day, with the yield on the 10-year note creeping up above 1.70%.   

Abroad, Retail Sales in England was reported as increasing 6.2% YoY, beating expectations.  The data trickled in on the same day that the Bank of England met and unanimously voted to hold interest rates steady at the nation’s historical low of 0.25%, in-line with estimates.  Additionally, the BoE pushed the nation’s growth forecast for the third quarter up to 0.3% from 0.1% after economic data over the past few Internationally, 27 leaders from the EU arrived today at a special summit in Slovakia to discuss a wide spectrum of important issues related to the future of the union without the U.K.  Highlights of the agenda include border control, terrorism prevention, and fortifying job growth in addition to detailing the terms that will be enforced on Britain when their exit from the EU is complete.  Elsewhere, Russia cut its benchmark rate by 50 bps to 10.00%, in-line with expectations, as their central bank reacts to declining inflation.  The next important Asian central bank decision-making will come from Japan next week, where the BoJ is expected to leave the current monetary policy as is.  While quantitative easing will be scaled down over time, investors believe further easing in the form of rate cuts may be in the cards at the November meeting, as the existing negative rate levels are not generating the reflationary results intended.

All three major U.S. stock indexes are down from 0.25% to 0.60% currently.  Treasury yields/swap rates are mostly higher across the curve in a bear flattening pattern in which 30-year rates are down 1 bp while the rest of the curve inside 30 years is up 1-5 bps.  The continued fall in oil prices has left WTI crude at $43/barrel and Brent crude at $45.80/barrel.

Ready to start a conversation?

We offer free consultations and platform demos.

Let's Talk