Markets Wobble as US Inflation Data Shapes Rate Cut Expectations

Markets Wobble as US Inflation Data Shapes Rate Cut Expectations

Global financial markets showed mixed reactions on Thursday as investors processed the latest US inflation data and its implications for future Federal Reserve rate cuts.

The October Consumer Price Index (CPI) reading has reinforced market expectations for potential rate adjustments, though uncertainty lingers about the timing and scope of such moves.

Key Market Movements

Asia-Pacific markets displayed varied performance:

  • Australia’s S&P/ASX 200 gained 0.26%.
  • Japan’s Nikkei 225 edged up 0.10%.
  • Hong Kong’s Hang Seng index fell 0.69%.
  • South Korea’s Kospi rose 0.28%.

US Inflation Impact

The US October CPI showed an annual inflation rate of 2.6%, meeting market expectations. Core CPI, which excludes food and energy prices, increased by 3.3%. These figures have led investors to price in an 80.8% chance of a quarter-point rate cut by the Federal Reserve in December, according to CME FedWatch Tool data.

Australian Labor Market Remains Resilient

Australia’s employment data revealed:

  • The unemployment rate held steady at 4.1%.
  • Employment increased by 15,900 jobs.
  • Participation rate slightly decreased to 67.1%.

My Bui, economist at AMP, noted, “The Australian labor market shows remarkable resilience despite extended restrictive rates.” We expect the Reserve Bank of Australia to maintain current rates through 2024, potentially easing in early 2025.

Asian Market Highlights

Several notable developments shaped regional trading:

  • The Japanese yen traded at 155.36 against the US dollar.
  • South Korean markets opened late due to national college entrance exams.
  • Hong Kong markets remained open despite typhoon warnings.
  • Chinese markets continued to seek direction amid stimulus expectations.

US Market Response

Wall Street’s reaction to the inflation data was measured:

  • S&P 500 inched up 0.02% to 5,985.38.
  • Dow Jones added 0.11% to 43,958.19.
  • Nasdaq Composite declined 0.26% to 19,230.74.

Looking Ahead

Market watchers are now focusing on:

  • Federal Reserve’s next policy moves
  • The potential impact of new political developments
  • Regional economic indicators
  • Corporate earnings reports

The markets continue to balance inflation concerns with growth prospects, while investors remain cautious about global economic conditions and policy shifts.

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