Macro Roundup (Nov 11)

This is a roundup of global macroeconomic news last night and what is expected today.

Investors are stampeding away from the dollar, as softer-than-expected U.S. consumer price data raises hopes that the Federal Reserve may need to tighten monetary policy less than expected in its fight against inflation and bolsters the case for risky assets.

Expectations of rising U.S. interest rates, volatile markets and geopolitical uncertainty have boosted the dollar over the last two years to a two-decade high against a basket of currencies.

While Thursday’s inflation data alone may not be enough to limit the scope of the Fed’s monetary policy tightening, it gave some investors confidence that consumer prices may have finally started trending lower, bolstering the case for them to cut their long dollar positions and dive into riskier assets such as stocks.

The unwind of dollar positions has led to some eye-popping moves in currency markets, as investors pull back from trades in the foreign exchange market that many said has become crowded by historical standards.

The U.S. currency was down as much as 3.3% against Japanese yen, its sharpest one-day slide since July 2016. Against the euro, it was off by 1.7%, its biggest drop since Nov. 4. Against a basket of currencies, the dollar was off about 2.2%, on pace for its worst day in nearly seven years.

Stock futures were slightly higher on Thursday night after better-than-feared inflation data fueled a broad market rally.

Futures tied to the Dow Jones Industrial Average added 58 points, or 0.1%. S&P 500 futures and Nasdaq 100 futures also gained about 0.1% and 0.2%, respectively.

In regular trading, the major averages posted their biggest one-day rallies since 2020. The Dow jumped more than 1,200 points. The S&P rose 5.5%, and the Nasdaq Composite surged about 7.4%.

All of the indexes are on pace for a winning week. The Dow is up 4% on a weekly basis, while the S&P and Nasdaq are on pace for increases of 4.9% and 6.1%, respectively. The three averages are also on track for a positive month.

The rally came after the Bureau of Labor Statistics reported a smaller-than-expected rise in consumer prices for the month of October, giving investors hope that inflation may be cooling. U.S. Treasury yields plunged after the data release, while tech stocks soared.

Oil prices settled 1% higher on Thursday, ending lower for the first time this week, as tamer-than-expected U.S. inflation data offset worries that renewed COVID-19 curbs in China would hurt fuel demand.

Brent crude settled 1.1% higher at $93.67, a $1.02 gain. U.S. West Texas Intermediate crude rose 0.8% to settle at $84.67, or 64 cents higher.

Gold prices rallied over 2% on Thursday to a more than two-month high as data showed U.S. inflation cooled off a bit in October, lifting hopes that the Federal Reserve would adopt a less aggressive approach to rate hikes.

Spot gold climbed 2.8% to $1,753.34 per ounce. U.S. gold futures jumped 2.5% to $1,756.90.

The pan-European Stoxx 600 closed 2.8% higher after the CPI print was published. Tech stocks ended up 7.6%, leading gains as the majority of sectors and all major bourses closed in positive territory. Oil and gas stocks were the sole outlier by the close of play, ending down 0.4%.