US Consumer Prices Show Inflation Pressures Remain Steady

US consumer prices announced this morning were in line with expectations. Headline CPI (3.1% vs street 3.1% and previous 3.2%) was slightly improved from last month, but the decline of 0.1% was less than 0.5% decline from 3.7% to 3.2% reported last month, and the CPI growth rate still remains above the 3.0% low reported in July. Core CPI over year (4.0% as expected and unchanged from last month) did not show any easing in inflation pressures. So the big drop in consumer prices reported last month appears to have stalled.

The initial knee-jerk reaction from traders was a dovish read on the data but that quickly reversed course and US market action has suggested a somewhat neutral to hawkish read, meaning that with inflation holding up, the Fed may not be able to start cutting interest rates as much or as quickly next year as had been widely speculated off of last month’s inflation numbers.

Currently, US index futures are trading up 0.1%-0.3%. Treasury yields, which had been falling through the morning, have reversed course and started to climb with the 2-year yield back up above 4.70% and the 10-year yield back up above 4.2%. Later today there is a 30-year bond auction in the US. The last major economic number before tomorrow’s Fed announcements is producer prices tomorrow morning.

Over in Europe today, the Dax is up 0.15% and he FTSE is up 0.35%. Heading toward Thursday’s Bank of England meeting, the UK released employment numbers this morning that showed employment insurance claims increased from last month but not as much as the street had feared. Average earnings excluding bonuses were better than expected (7.3% vs street 7.4%), but last month’s number was revised upward to 7.8%. Tomorrow brings industrial production and estimated GDP for the UK.  

Energy and metals action is mixed today. Energy contracts remain under pressure with WTI Crude Oil down 0.9%, but holding above $70.00/bbls, while Natural Gas is down 1.5%. Metals are bouncing back a bit, with Copper up 0.25% and Gold up 0.50%, trading back up above $2,000/oz.

In earnings news, Oracle is down 9.5% in premarket trading. Although the company beat the street by a penny on earnings, revenue came in short of expectations ($12.94B vs street $13.05B).

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