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US indices finished yesterday's trading lower after stronger CPI data than expected. S&P 500 traded 0.60% lower and Nasdaq declined 0.40%.
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Although CPI headline data was slightly higher and CPI core was in line with expectations, the market reaction was significant. US equities dropped immediately and USD appreciated.
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Indices from Asia-Pacific traded mostly lower today - Nikkei lost 0.70%, Kospi declined 0.90% while Nifty 50 was trading 0.60% lower. Indices from China dropped more than 2.0%.
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Treasury yields surged, and data revealed continued deterioration of China's economy.
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MSCI Asia Pacific Index dropped over 1%, ending a six-day winning streak.
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Hong Kong and mainland Chinese stocks declined after consumer and producer prices in China were below expectations.
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China's trade data was better than anticipated, and a state-backed stabilization fund is being considered to bolster the stock market.
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China macro data pack:
- Chinese Trade Balance USD (Tentative) Actual 77.71B (Forecast 70.6B, Previous
- Chinese Exports YoY USD (Tentative) Actual -6.2% (Forecast -8%, Previous -8.8%)
- Chinese Imports YoY USD (Tentative) Actual -6.2% (Forecast -6.3%, Previous -7.3%)
- Chinese CPI MoM Actual 0.2% (Forecast -, Previous 0.3%)
- Chinese CPI YoY Actual 0.0% (Forecast 0.2%, Previous 0.1%)
- Chinese PPI YoY Actual -2.5% (Forecast -2.4%, Previous -3.0%)
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S. Korean unemployment rate was 2.6%, and New Zealand's Manufacturing PMI was 45.3.
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Collins of the Fed discussed the potential expansion of the banks' term funding program. He also stressed that he is watching the real estate sector carefully and has not seen any problems so far.
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Collins stressed the need for higher rates for an extended period because of the resilient economy.
The dollar (USDIDX) continued to strengthen throughout yesterday's session beginning gains after a higher-than-expected CPI report from the US. After the results, investors' hopes for an end to the Fed's interest rate hike cycle diminished, and now a December hike is more likely.
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