GLOBAL MARKET SNAPSHOT
Global equities were weaker in aggregate, bookended by Australia and Brazil. ASX fell -1.7% on weakness in energy and materials, while Bovespa rose 1.2% as Petrobras gained 3.6% and banks were broadly stronger. In the U.S., markets seesawed with S&P seeing a -2.2% intraday decline from the highs at the open. Financials -1.4% and technology -1.3% weighed on the index, while momentum and volatility were sold. Shares of PG&E, California’s largest utility, tumbled -22% as the company warned of “significant liability” if it’s equipment is found to have started the California wildfires.
The Treasury curve steepened as the front-end strengthened on a soft CPI release. Moves were muted though as Fed Chair Powell is scheduled to speak this evening. Gilts yields dipped -1bp to 1.51% despite May’s cabinet approving a Brexit deal, although hurdles in the parliament remain.
The U.S. dollar index declined -0.3% on muted inflation data. British pound finished up 0.1%, retracing a -0.7% loss on news that May’s cabinet approved a Brexit deal. The strongest gains were seen in emerging markets with the JPMorgan EM FX Index up 0.5%. Russian ruble gained 1.4% as markets discount the likelihood of the U.S. passing more sanctions before yearend.
The Bloomberg Commodity Index jumped 2.8%, driven almost entirely by the 18% jump in natural gas prices. Natural gas prices have surged this month on concerns over stockpiles paired with cold revisions to weather forecasts. WTI broke a 12-day losing streak, gaining a modest 1.0% to $56.25 per barrel.
U.S. consumer prices increased by 0.3% in October bringing the 12-month change to 2.5%, which was consistent with expectations. The core CPI increased 0.2% m/m and 2.1% y/y. While the price of gasoline contributed meaningfully to the rise in the headline number (energy sub-component rose 2.4% m/m), it should serve have a dampening effect going forward given the drop in oil prices (gasoline futures have dropped 25%). Further, continued U.S. dollar strength and modest growth in wages should put a ceiling on inflation in the near- to medium-term.
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