The peaceful trading conditions that had characterised the first half of the week were brutally swept aside yesterday after a surprise CPI print from the US Bureau of Labour Statistics. According to the report, prices experienced their first decline in almost two years. The month-on-month figure fell to negative 0.1% in June, with the year-on-year falling to 3%. Both headline and core inflation rates fell below expectations.
Currencies were the first to react. The Dollar Currency Index immediately fell through the trapdoor, going on to lose half a percent on the day. Interestingly, the selloff in the greenback coincided with massive Yen buying, prompting speculation that Japanese authorities have finally stepped in to defend their currency. USDJPY plummeted an impressive 1.7% yesterday and the pair continued to probe lower in early trading in the Asian session this morning.
Gold took the news well, gaining 1.9% to close at $2,415 an ounce, the first time it has closed above $2,400 since the end of May and not far off a new record high.
The reaction in stocks was a bit more nuanced. Although on the face of it the prospect of lower interest rates is bullish for equities, the S&P 500 and Nasdaq Composite both experienced heavy selling pressure to close 0.88% and 1.95% in the red. The reasoning being the savvier investors appear to be rotating out of the major tech stocks that were almost solely responsible for the recent record-shattering rallies and diversifying into the smaller stocks that have so far remained on the sidelines. Indices have become very top-heavy in recent years, with a handful of outliers dragging up the average. Worth keeping an eye on where the smart money is headed.
Advertencia de riesgos : Productos derivados del trading y productos potenciados poseen un nivel más alto de riesgo.
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