Markets Post CPI and Amid Earnings season

Nadia ElBilassy, Market Analyst at Equiti

Did Markets just shrug off inflation data or is the grass greener on the other side?

Following the release of October’s U.S. Consumer Price index which came in with a reading of 8.2% vs 8.1% expected and 8.3% previous. The Stronger than expected figure have ultimately doubled down the probability of another hefty hike rate.

The surprise was in fact not the reading but the market reaction which have witnessed a sharp reversal with the 3 major indices closing in the green territory following the hot figure. The Dow Jones is found consolidating in a side-way movement. And the S&P 500 gradually trying to pick up steam to form its own side-way consolidation breaking the downward channel. 

Amid earnings season and central bank interventions, sentiment is still risk-on. With Gold prices trading in the narrow range of $1640 and $1670. Despite rising inflation and geo-political uncertainty, investors seem to be resorting to a different kind of safe haven, the U.S. Dollar. Gold dropped to a 2 week low, and continues to struggle to break above the $1660 level of this week. 

In addition to the USD/JPY Pair that continues to upscale targeting 150, consolidating near the 148 handle, other pairs like the GBP/USD and the EUR/USD meanwhile have been struggling to remain elevated, although the pound did gain some traction amid the UK’s political turmoil and the change of their finance chancellor to newly appointed Jeremy Hunt. Closing below the 200 period simple moving average will the take the pound back to the 1.12 region while breaking above the 1.1380 can prompt more upside movement. 

Markets seem to be pricing in matters differently as they cheer small wins such as JP Morgan reporting a 17% drop in Q3 profit but its above expectations keeping stocks way above the bottom. And although higher rates have been great for Financials, global slowdown fears are still intact, making banks set millions in reserves in allowance for credit losses and consider stock buybacks. 

Other banks like Banks like Bank of America were boosted by interest incomes for lenders as it posted better than estimate results, sending stocks for another round of highs eliminating bear market concerns.

Earning season is likely to be a catalyst for stocks, perhaps giving indices a jumpstart before the Feds monetary policy weighs. Despite projecting declines, better than expected figures are likely to drive markets upwards for a little while. Well, at least before November the 23rd

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