Market Snapshot – Gains in Stocks and Treasuries as CPI Dims the Fire
Yesterday’s market felt like a breath of fresh air after a surprisingly chill CPI print. Inflation numbers in both the UK and the US slid down a notch, nudging investors away from the extremes they’d been riding on. It was a quick reset that left the markets ready for the next wave of data tomorrow.
Why the Chill Made Everyone Smile
- UK CPI – CPI slipped to 2.5% YoY, just 0.1pp below the odds. Core inflation‑at‑3.2% was the slowest rise since September, and services CPI marked a dip to 4.4% – the lowest since 2022. The Bank of England is already braced for a 25bp cut next month.
- US Core CPI – Headline inflation ran 2.9% YoY, which matches expectations. Core inflation ticked up 3.2% YoY, 0.1pp shy of predictions and the gentlest move since last August. It suggests that underlying price pressures are easing.
In plain language: inflation is still above the Fed’s 2% target, but the rate of increase is slowing. That’s why traders were quick to ditch the hard‑line stance they’d been holding.
What Happened on the Corners of the Market
- Stocks – Big‑cap blues took a bite out of the market while small‑caps surged; the tech band saw a 9% rally in a short, sharp burst.
- Dollar – The DXY slipped under the 109 mark, signaling a softer spot for the greenback.
- Treasuries – Yields dropped across the road. The 5‑10 year oddball slid about 15bp, making them the most beautiful part of the day for bond lovers. Even the USD OIS curve turned side‑ways, nodding toward a cut as early as July.
Where Is The Real Story?
All these moves were largely a reversal of an extreme hawkish stance, rather than fresh money flooding in. The headline takeaway: the US economy is still on a “disinflationary roller coaster,” slowly narrowing the gap to the 2% target. The UK, meanwhile, keeps grappling with high inflation, sluggish growth, and a stubborn fiscal realm that’s not finished shaking out.
Big‑Name Perks & The Upcoming Data
Even the Chancellor of the UK, Rachel Reeves, got an unexpected windfall in the market; Gilts rallied dramatically. But you can still expect rough waters ahead – the bearish narrative in the UK headline headlines.
What’s On The Calendar Tomorrow?
- UK – GDP November expected to pick up 0.2% MoM, ending a two‑month dip. The BoE outlook remains relatively steady.
- US – Retail sales December (most important), weekly jobless claims, and Philly Fed manufacturing data.
- Bank Earnings – Bank of America and Morgan Stanley will kick off the earnings cycle, following strong June releases from Goldman and JPMorgan.
All in all, the markets are in a calm spot after a highly volatile week – but keep your eyes on tomorrow’s data. It’s the reveal that could push the narrative in either direction. Stay tuned, fun folks – the next data dump is almost ready to hit your screens!
