Morning Minutes

US Inflation Soars; Oil Rebounds as China Lockdowns Ease




US index futures have popped upward on a mixed US consumer price inflation report. Although the headline number reached its highest level since 1981 and was slightly worse than expected (8.5% vs street 8.4% and previous 7.9%), inflation excluding food and energy was essentially steady and slightly better than expected (6.5% vs street 6.6% and previous 6.4%). These numbers suggest the headline surge may be related to commodity prices, some of which, like WTI crude oil, have slipped back down a bit in the last few weeks.    

At the moment, Dow Futures are up 0.4%, S&P futures are up 0.8% and NASDAQ futures are up 1.3%. Europe, however, remains under a cloud this morning with the Dax down 0.9% and the FTSE down 0.6%. Germany’s ZEW monthly investor survey was worse than last month, dismal overall, but not quiet as bad as feared for both the current situation (-30.8 vs street -35.0 and previous -21.4) and economic sentiment (-41.0 vs street -48.0 and previous -39.3) categories. The Euro is down 0.2% as investors await Thursday’s ECB meeting.  

The US 10-year treasury note yield has been holding steady near 2.80% overnight ahead of this week’s central bank meetings. The Reserve Bank of New Zealand is widely expected to announce a 0.25% interest rate hike for the third meeting in a row, this time it would be to 1.25%. The Bank of Canada is widely expected to announce a 0.50% rate hike at tomorrow’s meeting and possibly may also hint toward or even announce when Quantitative Tightening may begin. US Fed Vice Chair Nominee Brainard is speaking today which the street may watch for whether she confirms or walks back last week’s hawkish outlook on US monetary policy.

Easing COVID restrictions in some parts of China have given Chinese markets a boost with Shanghai and Hong Kong climbing 1.4% and 0.5%. China is scheduled to announce trade numbers overnight tonight.

Energy contracts are soaring this morning on the China news. WTI and Brent Crude Oil are up 4.2% to 4.5%, but WTI remains below $100.00/bbl. Natural gas, meanwhile, is up 2.6% and gasoline is up 2.4%. Metals action is mixed today with Gold, Copper and Silver all up 0.6%-0.8% but Platinum is down 1.1%.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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