WIKIFX REPORT: Inflation fall

Weekly Market Brief

The main events for this week were the US midterm elections and the US Inflation print. Speculation to start the week that the Republicans could win both houses kept stocks supported. However, on Wednesday uncertainty crept in as to whether or not the Democrats could take the Senate. This, alongside some big news for Bitcoin that Sam Bankman-Fried was trying to sell the crypt behemoth FTX to Binance, pressured stocks lower. This all put the main focus on the US Inflation print to try and gauge how aggressive the Fed will need to be in terms of rate hikes. The US Inflation print missed and stocks rallied on lower Fed rate hiking expectations.

Other key events from the past week

• SP500: US midterm elections, Nov 09: There was a great deal made of the run in US stocks post-US midterm elections from a seasonal perspective. See here for the striking seasonal bias that the S&P500 has demonstrated since 1950.

• Bitcoin: Crytpo worries, Nov 09: News that Binance was potentially pulling out of its deal to buy FTX on Wednesday caused Bitcoin to fall lower. FTX has now ‘paused’ withdrawals and the risk is that FTX ends in bankruptcy. Will this ‘Black Swan’ event send further shockwaves through crypto？

• USD: Inflation focus, Nov 10: The hotly anticipated US CPI print on Thursday came in at 6.3% y/y for the core (6.5% expected) and 7.7% y/y for the headline (8% expected). Lower interest rate expectations boosted stocks and sank the USD as STIR markets now expect only a 50bps rate hike in December.

Key events for the coming week

• CAD: Inflation focus, Nov 16: At 13:30 UK time the CAD headline inflation print will be released and is expected to fall from the prior reading of 6.9% y/y to 6.2%. The core reading is expected to fall to 5.5% y/y from 6.0%.

• Strong seasonals approach for the CAC40: Will the CAC40 move higher into year-end？

• AUD: Labor data, Nov 17: Australian unemployment data is expected to show a fall to 3.4%. However, the RBA will be watching for any serious signs of slowing down in the labour market to potentially validate a slowdown in RBA rate hikes.