Customers buy eggs at Sprouts grocery store on April 12, 2023 in San Rafael, California.
Justin Sullivan | Getty Images News | Getty Images
This report comes from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open keeps investors updated on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Inflation higher than expected
USA The consumer price index rose 0.2% The annual inflation rate in September was 2.4%, according to the Labor Department. Both figures are 0.1 percentage points higher than the Dow Jones Average. Still, the annual growth rate is at its lowest level since February 2021.
The market is too hot for comfort
major U.S. indexes Decline affected by hot CPI report. this S&P 500 Index Down 0.21% Dow Jones Industrial Average Down 0.14% Nasdaq Index down 0.05%. Asia Pacific market Most rose on Friday. The Bank of Korea announced news that South Korea’s Kospi index fell by about 0.15% Interest rates cut by 25 basis points to 3.25%, the first downward revision since 2020.
China “does whatever it takes”
China’s Finance Minister Lan Fo’an held a press conference on Saturday to introduce “increased efforts” in fiscal stimulus policies State Council Information Office. This is in the market Disappointed with Tuesday’s press conference Regarding economic measures. Chen Li, chief global strategist at Alpine Macro, told CNBC that this is Beijing’s “moment at all costs.”
The bank is not yet clear
Lower interest rates tend to be good for banks. As yields on money market funds and other assets fall, the flight of cash from bank accounts will slow. This lowers banks’ funding costs, while yields on banks’ income-generating assets do not fall as quickly. But that expectation May not be so perfectly satisfying this time.
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Artificial intelligence-related stocks, such as semiconductors and Big Tech companies, are soaring on the promise of new revenue streams and a revolution in how work is done. Higher prices mean they pose a barrier to entry for some investors. But there is Cheaper AI gameplaysaid one portfolio manager.
bottom line
If inflation becomes severe, interest rates will need to be raised to throw cold water on the economy and slow it down.
Atlanta Fed President Raphael Bostic agreed. “I’m totally willing to skip the meeting (to cut rates) if the data suggests it’s appropriate,” Bostic told the Wall Street Journal on Thursday.
The data shows this is indeed the case. both September jobs report Consumer Price Index was hotter than expected. “To me, this volatility probably means we should take a pause in November,” said Bostic, a voting member of the Federal Open Market Committee.
But Bostic acknowledged that it’s important to understand whether the individual data points coalesce into a larger pattern, or whether they are just “a jumble,” as Bostic puts it.
The futures market seems convinced these numbers are bad. According to the central bank, traders increased bets on rate cuts after digesting the CPI report. CME FedWatch Tool.
They now believe the probability of the Fed cutting interest rates by 25 basis points at its November meeting is 87.1%, up from 80.3%. The increase in stakes is small. But its implications are significant: Even after the CPI report, the market still seemed more concerned about a slowdown than that inflation remained sticky.
Initial jobless claims for the week ended Oct. 5 may add to those concerns.
But that number could be bad again. “This morning’s sharp increase in jobless claims is related to hurricane-related distortions and is at the tip of the spear of recent distortions in key economic data,” said Joseph Brusuelas, chief economist at RSM.
If “key recent economic data” is overall erratic and distorted, then perhaps the best thing we can do is wait and wait for this turmoil to be over.
– CNBC’s Jeff Cox, Samantha Subin and Hakyung Kim contributed to this article.
