- US November CPI +7.1% y/y vs +7.3% expected
- US sells 30-year bonds at 3.513% vs 3.482% WI
- Timiraos: Fed on track for 50 bps tomorrow but lower inflation could complicate 5% target
- Biden: Inflation is coming down but is still too high
- China state media admits that the number of covid cases in Beijing is rapidly rising
- SBF took aim at Binance in his planned testimony to congress
- US headed for an extremely-cold Christmas and it will put a damper on holiday spending
Markets:
- Gold up $28 to $1809
- US 10-year yields down 9 bps to 3.52%
- US 2-year yields down 16 bps to 4.24%
- S&P 500 up 29 points to 4019
- WTI crude oil up $2.28 to $75.45
- AUD leads, USD lags
The main economic data point of the month delivered another big market move but also some controversy. US equity futures surged just before the release and when it was lower-than-expected and stocks rallied further, that was a red flag. We'll likely never know what happened there but it's not a great look for market integrity.
In any case, the market reaction was strong with the US dollar sinking and in particularly against the yen. An initial move of 150 pips in the yen was followed by a second that extended the decline to more than 250 pips. As the day wore on, most of the second leg was erased but the moves were still substantial.
Some of the back-and-fill is around the multitude of central bank risks this week, starting with the FOMC decision tomorrow. The equity market showed some jitters and bonds were rattled by another big auction tail.
Looking beyond the upcoming central banks, there's suddenly a much stronger argument that inflation has peaked and headed towards target sooner than previously believed. In the goods space, we could (should?) see outright deflation in the coming months.
