This week markets were volatile and the direction shifted many times, as news from Gaza and the Middle East was contradictory. The economic data from
This week markets were volatile and the direction shifted many times, as news from Gaza and the Middle East was contradictory. The economic data from the US though remained mostly positive this week as well, with the PCE price index showing that consumption remains strong, indicating strong consumer sentiment.
Following the news, the US dollar sank to its lowest level of the day though, as the market digested strong US consumption data and increasing core inflation. A claim from Al Jazeera that Israel-Hamas peace talks are ‘progressing swiftly’ has added to the US dollar’s weakening, though that news was met with suspicion.
Crude Oil dropped approximately $1 since its peak after the PCE report, but then reversed higher as the conflict in Gaza escalated. The USD dived lower against the JPY, with USD/JPY falling below 150 but ended the day higher versus the EUR and the GBP, although trading was erratic, with investors focusing on stocks and bonds. The S&P 500 gave up early gains, while the Nasdaq lost 0.8%. US bond yields finished the day and the week lower. Overall, it’s a really difficult market right now, and it’s difficult to put together any kind of cohesive strategy for the time being.
US September PCE Inflation Report
Core PCE yy
September PCE core YoY +3.7% vs +3.7% expected
August PCE core YoY was +3.9%
September PCE core MoM +0.3% vs +0.3% expected
August PCE core MoM was +0.1%
Headline PCE +3.4% vs +3.4% expected (prior +3.5%, revised to 3.4%)
Deflator MoM +0.4% vs +0.3% expected (prior +0.4%)
Full report
Consumer spending and income for September:
Personal income +0.3% vs +0.4% expected. Prior month +0.4%
Personal spending +0.7% vs +0.5% expected. Prior month +0.4%
Real personal spending +0.4% vs +0.1% prior
After Thursday’s GDP figures, the positive surprises in consumption and headline PCE should come as no surprise (the high deflator in the report still doesn’t make sense), but the continuous reduction in core should provide some relief to the Fed. However, if the Fed is to keep inflation under control, consumption must slow for some time.
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