Daily Market Commentary 16th November 2022

The US PPI number was softer than expected, leading to further speculation of a pivot/pause from the Federal Reserve, in terms of their aggressive monetary policy. The PPI number came in at 0.2% for October, or an annualised 8%, half of what was expected. This allowed Bond Yields and the US Dollar to ease and equities to rally. The market speculation of a pivot/pause was clearly and emphatically dismissed by the Federal Reserve, at their last meeting and there is little to suggest a change, but it does not stop market dreaming. The softer US Dollar allowed the GBP to rally towards 1.1900, while the Yen pushed up to 139.20. The EUR was steady on 1.0380, clearly impacted by ever depressing economic data, with the latest EU and German ZEW Economic Sentiment report, remaining heavily negative.

Chinese Retail Sales contracted, while Industrial Production was weaker than expected, due to continued Covid restrictions. Japanese GDP contracted for Q3, while Industrial Production turned negative for September. The RBA released their latest minutes and confirmed the contested debate over inflation and interest rates. The RBA recognised inflation but only raised 25 basis points, due to the impact of cost-of-living pressures and falling house prices. The RBA also released a report lambasting their recent forecasting of inflation, which was horribly wrong, causing the Central Bank to address inflation far too late. It has not apparently learned a whole lot from the report.

Markets will look ahead to the UK’s and Canada’s CPI inflation numbers, released later tonight, to gauge the pressures on interest rates.