Most markets around the world staged an intraday counterattack! A big drop in pre-market turns into a historical size increase at close
The September U.S. CPI data released last night showed that commodity-related inflation data declined as supply chain problems improved, but overall inflation remained high as housing, medical, and auto insurance service inflation continued to rise. The previous CPI was 8.3%, and the latest announcement was 8.2%, which was significantly worse than the expected 7.7%. The core inflation data which is the CPI data but without the energy and food sectors. The Core CPI latest announcement was at 6.6%, it was the highest year-on-year growth rate in 40 years. The Core CPI increased for two consecutive months, and the latest report's growth rate was also higher than the expected 6.5%. Therefore, the market expectations for the Fed's violent interest rate hikes to curb inflation have increased across the board.
When this data was released, all major indexes across the world like European, American, and Hong Kong index futures plummeted sharply. Also, most currencies and gold also suffer from the news and plummeted sharply. For example, the Dow Jones index once fell by more than 600 points. The fall was because most investors in the market believe that the Fed will become more aggressive after the release of this CPI data, the pricing of the benchmark interest rate by March next year has risen from 4.5% to nearly 5%, and the probability of a 75 basis point rate hike in December has increased from 34% rose to nearly 66%.
However, the situation changed after the opening of the US market at 9:30. Unlike the previous releases of CPI data, the market continued to plummet after the release of the data for at least one trading day. This time the sharp drop after the release of the data has caused major indexes and currency prices to hit historical lows or strong support positions. At the same time, the yield on the 10-year U.S. Treasury bond once again surged to 4%, once rising to the highest level since 2008. Which led to a reversal of the market 1 hour after the CPI data was released. It is the first time in history that it first fell by 500 points and then rose by 800 points in a single day, returning to more than 30,000 points.
