Equities rally hard as inflation worries wane

Yesterday’s bounce in equity indices was powerful, but the momentum seems to be continuing today, with US benchmarks trading notably higher during the London session.

Both the CPI and PPI indices released this week showed inflation is rising more than expected, which might prompt the Fed to raise rates (or taper) sooner than later.

At the same time, Federal Reserve governors have been reiterating that price pressures from the reopening of the economy would prove transitory, and the central bank wouldn’t be changing its ultra-loose monetary policies anytime soon.

Later in the day, the US retail sales are due, and market participants forecast a large decline month-on-month as the stimulus effect fades. Moreover, industrial production and capacity utilization will be released.

US yields failed to hold their Wednesday’s post CPI gains, and the 10-year yield is down for the second day today, dropping back toward 1.6%. That is helping precious metals, which are rising at the time of writing.

Oil crashed 3% today as investors started to play the scenario that inflation si temporary and the USD dropped as the medium-term downtrend is still valid for most of the USD pairs.

Source: https://www.axiory.com/market-news/equities-rally-hard-as-inflation-worries-wane