US futures extend drop after inflation report - BNN

U.S. equities extended losses after data showed consumer prices accelerated at the fastest pace since 1990, adding to evidence of building inflationary pressures. 

The S&P 500 fell 0.4 per cent, led by losses in technology and energy, while the Nasdaq 100 declined 0.9 per cent. Treasuries fell with the U.S. yield curve flattening. The dollar climbed and gold jumped to the highest since June.

Risks are building for investors as persistent elevated inflation could force the Federal Reserve to tighten monetary policy faster than anticipated. The U.S. consumer price index increased 6.2 per cent in October from a year earlier, beating expectations for 5.9 per cent, according to Bloomberg data. 

“If inflation doesn’t subside, the Federal Reserve may need to taper at a more substantial rate and hike interest rates, which could hurt stocks and bonds,” said Nancy Davis, founder of Quadratic Capital Management.

Treasury Secretary Janet Yellen on Tuesday reiterated her view that elevated U.S. inflation won’t persist beyond next year and said the Fed will not allow a repeat of 1970s-style price rises. Still, traders worry the latest figures may be enough to compel the Fed to raise interest rates as soon as June 2022 when it has finished tapering its assets-purchase program.

“I expect lots of eyeballs were bulging out of their sockets when they saw the number come in,” said Seema Shah, chief strategist at Principal Global Investors. “Inflation is clearly getting worse before it gets better, while the significant rise in shelter prices is adding to concerning evidence of a broadening in inflation pressures.”

The U.S. five-year breakeven rate on Treasury inflation protected securities rose to a record. Meanwhile, the yield on the two-year Treasury note rose eight basis points to nearly 0.50 per cent, while that of the 10-year gained nearly four points and the 30-year was unchanged. 

“A flattening curve does not portend well for risk assets into next year,” said Cliff Hodge, Chief Investment Officer for Cornerstone Wealth. “The bond market is telling you that the Fed is way behind the curve on policy, as short rates rocketed while long rates have taken the release in stride.”

Oil swung between gains and losses as a U.S. government report forecast oversupply next year. Iron ore tumbled on dimming prospects for steel demand owing to China’s real-estate troubles. And Bitcoin surged past US$68,000.

What to watch this week:

• China’s Communist Party’s decision-making Central Committee meets through Thursday
• U.S. bond marked is closed in observance of Veterans Day Thursday
• China holds its annual Singles’ Day, the world’s biggest shopping festival, when e-commerce giants like Alibaba and JD.com Inc. lure buyers with bargains Thursday

Stocks

• The S&P 500 fell 0.4 per cent as of 9:30 a.m. New York time
• The Nasdaq 100 fell 0.9 per cent
• The Dow Jones Industrial Average fell 0.1 per cent
• The Stoxx Europe 600 was little changed
• The MSCI World index fell 0.3 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro fell 0.2 per cent to US$1.1567
• The British pound fell 0.2 per cent to US$1.3536
• The Japanese yen fell 0.5 per cent to 113.38 per dollar

Bonds

• The yield on 10-year Treasuries advanced four basis points to 1.47 per cent
• Germany’s 10-year yield advanced one basis point to -0.28 per cent
• Britain’s 10-year yield advanced five basis points to 0.87 per cent

Commodities

• West Texas Intermediate crude was little changed
• Gold futures rose 1.7 per cent to US$1,861.60 an ounce

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2021-11-10 14:16:40Z
CBMiVGh0dHBzOi8vd3d3LmJubmJsb29tYmVyZy5jYS91LXMtZnV0dXJlcy1leHRlbmQtZHJvcC1hZnRlci1pbmZsYXRpb24tcmVwb3J0LTEuMTY3OTYwMtIBAA