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General Market Analysis 12 October 2023

Stocks Rally after Fed Minutes – Nasdaq up 0.7%

US Stock indices moved higher again yesterday as FOMC Meeting Minutes skewed market sentiment to a more dovish outlook. The Nasdaq jumped 0.71% on the day followed by the S&P which closed 0.43% higher and the Dow rose 0.19%. US treasury yields fell again with the 10-year hitting a 2-week low of 4.55% and the dollar once again edged higher on the majors. Oil fell again – with WTI now filling that gap that it experienced on the open on Monday – and Gold moved higher, now trading up around the $1,875 level. All these moves coming despite a stronger than expected print on the US PPI data earlier in the day.

Key Inflation Data Ahead

It has been a strange week for global financial markets so far with many analysts left scratching their heads after some of the moves we have – or more accurately – have not seen. We opened the week with gapping in the market on the back of a new war in the middle east after Hamas forces attacked Israel and many investors looked for safe-haven trades due to the implications of how the conflict could escalate. However, these moves have been relatively short lived (with the exception of the rally in Gold) and traders have swiftly moved back to fundamentals and more accurately US fundamentals. Fed members have changed to a more dovish narrative this week and investors have jumped on the opportunity with stocks rallying and the dollar taking a dive. However, for these moves to continue we need to see data backing up the commentary and last night’s PPI numbers were stronger than expected, if we get a similar result tonight with the more influential CPI data then we could see some fast and aggressive corrections in the market.

Key Data Ahead for Traders

Markets have kicked off the day on the front foot after Fed minutes encouraged investors with a more dovish skew, but focus will swiftly move to some key data points today. Asian markets are likely to trade in line with the sentiment from the US close with little in the way of risk events to change direction, however on the London open investor focus will move to the UK and the latest GDP update. However, the main event will once again come after the New York open when we have the key CPI numbers released as well as the weekly unemployment claims data. The year-on-year number is expected to come out at 3.6% which is still well above the Fed’s target of 2% and anything above that could lead to some sharp moves in the market.