The US Bureau of Labor Statistics sent ripples throughout markets yesterday, revealing higher than expected inflation rates across the board. The year-on-year inflation rate came in at 3.1% versus predictions of just 2.9%. The core inflation rate, which excludes some of the more volatile prices, remained at 3.9%, the same level from a year prior and higher than expectations of 3.7%. Many will see this as the final nail in the coffin with regards to an early pivot to lower interest rates. The Fed has made it clear time and time again that it will not act until inflation has been reigned in and the recent data print will have done nothing to assuage them.
The ensuing carnage in stocks was not pretty. The Dow Jones lost over 500 points on Tuesday, down 1.35% by the closing bell. The S&P 500 and Nasdaq Composite fell 1.37% and 1.80% respectively. The impact on currencies was equally predictable, the Dollar Currency Index rose 0.7% on the day, edging close to the 105 mark. The swing was enough to push the Dollar back above 150 Yen, a valuation not seen since last November.
Commodities did not escape unscathed either, gold lost 1.33% on the day and finally closed below $2000 for the first time this year.
Speaking of Japan, the recent weakness in the Yen, coupled with strong earnings from a number of Japanese companies, was enough to push the Nikkei 225 above 38,000 for the first time since January 1990. Traders focused on Japanese markets are all too aware that the Nikkei 225 is now closing in on its previous all-time high established decades ago.
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