CPI rekindles rate cut expectations
A significant inflation indicator has reignited market enthusiasm for a Federal Reserve rate cut. The U.S. April CPI and core CPI both decelerated from March as economists had expected, with year-over-year growth rates of 3.4% and 3.6% respectively, marking the lowest increases in three years; the month-over-month growth rates for April CPI did not stabilize as anticipated in March but instead slowed to 0.3%, while the core CPI month-over-month growth slowed to 0.3% as expected, marking the first slowdown in growth in six months and a cooling off after three consecutive months of growth rates higher than expected.
Commentators have stated that the CPI inflation indicator has finally taken a small step in the direction that Federal Reserve officials are considering for starting to cut interest rates. Although the data may bring some hope for a resumption of the downward trend in inflation, Fed officials will want to see more data to gain confidence in cutting rates. The day before the CPI release, Federal Reserve Chairman Powell had already indicated that the Fed needs patience to allow restrictive policies to take effect. Journalist Nick Timiraos, known as the "New Fed Mouthpiece," wrote that Wednesday's data were not enough to change the Fed's expectations on whether and when to start cutting rates, and the Fed may still not act before September, possibly needing two more CPI reports to strengthen its confidence.
Advertisement
Following the release of the CPI, investors increased their bets on a September rate cut, with swap contracts pricing showing that traders expected the probability of the Fed cutting rates by 25 basis points by September to rise above 80%. U.S. Treasury prices jumped during the session, and yields plummeted more than 10 basis points from their daily highs, with the benchmark 10-year U.S. Treasury yield reaching a new low since April 10th, when the March CPI was announced with unexpected growth; the U.S. dollar index accelerated its decline, also reaching a new low since April 10th; U.S. stocks opened broadly higher, with all three major indices setting new closing historical highs, however, the retail investor-driven stocks that had surged in the previous two days "cooled off," with GameStop and AMC among several stocks experiencing double-digit declines during the session.
As the U.S. dollar accelerated downward, non-U.S. currencies普遍上涨, with the Japanese yen rising more than 1% against the U.S. dollar, and both the onshore and offshore renminbi reversing a three-day losing streak, while the euro and British pound erased losses since the announcement of the U.S. March CPI. Commentators have said that the U.S. dollar-Japanese yen is the most sensitive U.S. dollar cross-currency pair to the trend of the U.S. fixed income market to date; if U.S. interest rate investors bring forward their expected timing for the Fed to cut rates, this currency pair may also experience the greatest volatility. Cryptocurrencies also rose, with Bitcoin surging by more than $5,000 during the session, breaking through the $66,000 mark for the first time in over three weeks.
Among commodities, following the release of the CPI, the expectation of a rate cut boosted the gains in precious metals gold and silver, with gold closing up more than 1%, reaching a high not seen since late April, and silver rising more than 4% during the session, with futures silver closing at a new high since 2013; most industrial metals continued to rise, with New York copper futures, which experienced a historic squeeze on Tuesday, continuing to approach the historical high set at the beginning of the Russia-Ukraine conflict in 2022, but the upward momentum eased, with the price rising nearly 5% during the session before giving up most of the gains.
The International Energy Agency (IEA) monthly report lowered its forecast for global oil demand growth for the second consecutive month, hitting oil prices, but international crude oil prices dramatically reversed during the session, narrowly escaping the nine-week low set on Tuesday. After the CPI announcement, crude oil briefly turned positive, with the U.S. Department of Energy announcing that U.S. EIA crude oil inventories fell more than expected for the second consecutive week, with crude oil, which had fallen more than 1% during the session, erasing its losses and turning positive.
The S&P 500 and Nasdaq Composite both rose more than 1%, with Nvidia leading tech giants, the chip stock index rising for four consecutive days, and retail investor-driven stocks experiencing double-digit declines during the session.
The three major U.S. stock indices generally opened higher and continued to rise. In the afternoon, the gains for the Nasdaq Composite and the S&P 500 both expanded to more than 1%, with the Dow Jones Industrial Average rising nearly 380 points, or more than 0.9%, at one point in the session, all setting new intraday records, and ultimately closing higher for two consecutive days, with the largest gains since the release of non-farm employment data on May 3rd, which fueled expectations for a rate cut.
The Nasdaq closed up 1.4%, at 16,742.39 points, marking three consecutive days of gains and setting new closing historical highs for two consecutive days. The S&P closed up 1.17%, at 5,308.15 points, marking the first time in history it closed above the 5,300-point mark. The Dow rose 349.89 points, or 0.88%, to 39,908.00 points,刷新3月28日所创的收盘纪录高位。
The tech-heavy Nasdaq 100 Index closed up 1.49%,刷新收盘历史高位,衡量纳斯达克100指数中科技业成份股表现的纳斯达克科技市值加权指数（NDXTMC）收涨2.31%,两日连创收盘新高,均连涨四日。价值股为主的小盘股指罗素2000收涨1.14%,连涨三日至3月28日以来高位。In various sectors, the anticipation of a rate cut in the United States has heated up, leading to a decline in European bond yields as well. Real estate, which is sensitive to interest rates, led the gains with a 3.6% increase, followed by technology stocks with a nearly 1.1% increase, and healthcare stocks with a nearly 0.7% increase. The German-listed pharmaceutical company Merck, which reported a better-than-expected decline in profits for the first quarter, saw its shares rise by 4.8%. Among other individual stocks reporting earnings, Commerzbank, a German commercial bank, reported a better-than-expected increase in quarterly profits, reaching a ten-year high, and its shares rose by 5.1%. Experian, a consumer credit reporting data company listed in London, reported positive annual organic revenue growth guidance and its shares surged by 8.1%, leading the Stoxx 600 constituents. In contrast, Neste, a Finnish biofuel producer, lowered its profit guidance for renewable products this year and its shares fell by 14.8%, leading the decline among Stoxx constituents.
After the CPI announcement, the 10-year U.S. Treasury yield plunged by more than 10 basis points, reaching a five-week low. European government bond prices rose across the board, with yields following the downward trend of U.S. Treasuries. By the end of the bond market, the UK's 10-year benchmark bond yield was around 4.06%, down about 11 basis points during the day, briefly breaking below 4.06% during the U.S. stock market morning session, hitting a low not seen since April 10; the 2-year UK bond yield was around 4.23%, down about 7 basis points during the day; the benchmark 10-year German government bond yield was around 2.42%, down about 13 basis points during the day, and after the U.S. CPI announcement, it briefly broke below 2.42%, hitting a low not seen since May 7; the 2-year German bond yield was around 2.89%, down about 9 basis points during the day.
The U.S. 10-year benchmark Treasury yield broke above 4.45% in the early Asian session, hitting a daily high. After the U.S. CPI announcement, it quickly fell below 4.40% to below 4.34%, hitting a low not seen since April 10, breaking through the 50-day moving average and probing the 100-day moving average. The intraday decline was slightly more than 10 basis points, and by the end of the bond market, it was around 4.34%, down about 10 basis points during the day.
The 2-year U.S. Treasury yield, which is more sensitive to interest rate prospects, tested 4.83% in the early Asian session, hitting a daily high. It was around 4.78% before the CPI announcement and quickly fell below 4.71% after the announcement, hitting a low not seen since April 5. It broke through the 50-day and 200-day moving averages, with an intraday decline of more than 11 basis points. By the end of the bond market, it was around 4.72%, down nearly 10 basis points during the day, and along with other maturities of U.S. Treasury yields, it has declined for three consecutive days.
The U.S. dollar index hit a five-week low, with the yen rising more than 1% and Bitcoin surging by $5,000, breaking through the $66,000 mark.
The ICE U.S. Dollar Index (DXY), which tracks a basket of exchange rates against the euro and five other major currencies, approached 105.10 in the early Asian session, hitting a daily high. It then turned lower and maintained its downward trend. After the U.S. CPI announcement, the decline rapidly expanded, breaking below 104.50. During the U.S. stock market morning session, the decline narrowed and it briefly rose back above 104.80, before the decline expanded again. After the U.S. stock market closed, it fell below 104.30, with an intraday decline of nearly 0.7%, hitting a low not seen since April 10 when the U.S. March CPI was announced.
By the end of the Wednesday foreign exchange market, the U.S. dollar index was around 104.30, with an intraday decline of nearly 0.7%, marking three consecutive days of decline. The Bloomberg U.S. Dollar Spot Index, which tracks the exchange rate of the U.S. dollar against ten other currencies, fell by about 0.6% during the day, marking two consecutive days of decline to a low not seen since April 9.
Among non-U.S. currencies, the yen, which had declined for three consecutive days, rebounded significantly. The U.S. dollar against the yen fell below 154.80 during the U.S. stock market morning session, hitting a low not seen since May 7, with an intraday decline of nearly 1.1%. At the close of the U.S. stock market, it was slightly below 155.00, with an intraday decline of about 1%. The euro against the U.S. dollar rose after the U.S. CPI announcement, and after the U.S. stock market closed, it approached 1.0890, hitting a high not seen since April 9, with an intraday increase of more than 0.6%. The British pound against the U.S. dollar approached 1.2690 after the U.S. stock market closed, hitting a high not seen since April 10, with an intraday increase of nearly 0.8%.
The offshore renminbi (CNH) against the U.S. dollar hit a daily low of 7.2422 in the early Asian session. After turning higher in the morning, it maintained its upward trend. After the U.S. CPI announcement, it quickly rose to 7.2056, with an intraday increase of 342 points, breaking through 7.21 for the first time since May 6, hitting a high not seen since May 6. At 4:59 AM Beijing time on May 16, the offshore renminbi against the U.S. dollar was reported at 7.2179 yuan, up 219 points from the New York close on Tuesday, rebounding after three consecutive days of decline.After the release of the U.S. CPI, Bitcoin (BTC) quickly broke through $64,000, rising above $65,000 during the early and mid-morning sessions of the U.S. stock market, and once reached above $66,400 at the end of the day. This was the first time since April 24th that it broke through the $66,000 mark, rebounding by slightly over $5,000 from the intraday low in the Asian morning session, with an increase of more than 8%. At the close of the U.S. stock market, it was above $66,000, having risen by over 7% in the last 24 hours, and fell below $66,000 after the market closed.
Crude oil turned positive after falling more than 1%, breaking away from a nine-week low.
International crude oil futures turned from a decline to a V-shaped recovery. During the Asian session, when the U.S. WTI crude oil broke through $78.70, it rose by more than 0.9% intraday, while Brent crude oil approached $83.10, rising by more than 0.8% intraday. The European stock market turned negative in the early session, and after the U.S. CPI was announced, it turned positive in the short term. When the U.S. stock market refreshed its daily low in the early session, U.S. oil fell to $76.70, down 1.7% intraday, and Brent oil broke below $81.10, down 1.6% intraday. After the U.S. EIA crude oil inventory was announced, it turned positive at the end of the morning session.
In the end, crude oil rebounded on Tuesday. The WTI June crude oil futures closed up by $0.61, a 0.79% increase, at $78.63 per barrel; Brent July crude oil futures closed up by $0.37, a 0.45% increase, at $82.75 per barrel, both breaking away from the closing low of the nearest-month contract since March 12th, which was refreshed on Tuesday.
U.S. gasoline and natural gas futures rebounded together. The NYMEX June gasoline futures, which fell on Tuesday to refresh the low since February 21st, closed up by 1.5% at $2.4968 per gallon; the NYMEX June natural gas futures closed up by 3.51% at $2.416 per million British thermal units, refreshing the high of nearly four months.
New York copper continued to approach the historical high of two years ago, and gold rose by more than 1% after the CPI, while silver set an eleven-year high.
London base metal futures continued to rise on Wednesday, with leading nickel rising by more than 2%, rebounding to the high since late April. Copper, which fell on Tuesday, also rebounded, with a gain of slightly more than 1%, closing above $10,200 for the first time in two years, setting a new high for April 2022 for the second time after Monday. Aluminum closed up by nearly 1.9%, approaching $2,600, setting a new high for three weeks, and continued to rise for three days with tin and lead in London. Lead in London set a new high for three consecutive days since November last year, and tin set a new high for three consecutive days since late April. However, zinc in London fell from the high set by four consecutive days since March last year.
New York copper futures rose for five consecutive days, with COMEX July copper futures closing up by 0.6% at $4.9245 per pound, setting a new high for three consecutive days for the last two years, and continued to approach the historical high set by copper futures on March 4, 2022, with a rise to $5.128 during the session, an intraday increase of nearly 4.8%.
After the U.S. CPI was announced, New York gold futures quickly approached $2,385, and spot gold approached $2,379. After a short-term decline at the beginning of the U.S. stock market, it accelerated upwards. During the U.S. stock market lunch break, the futures gold rose above $2,396, an increase of more than 1.5% intraday, and spot gold broke through $2,390, an increase of nearly 1.4% intraday, both refreshing the high since April 22nd.
By the close of the U.S. stock market lunch break, the COMEX June gold futures closed up by 1.48%, the largest increase since April 5th, rising for two consecutive days, at $2,394.9 per ounce, refreshing the high since April 19th set last Friday. At the close of the U.S. stock market, spot gold was above $2,387, with an intraday increase of nearly 1.3%.New York silver futures rose for two consecutive days, with COMEX July silver futures closing up about 3.6% at $29.73 per ounce, setting a new high for the main contract since February 15, 2013. After the closing, the silver futures gain further expanded, once rising to $29.98, up nearly 4.5% from Tuesday's close.