While things remained pretty rough in Europe, the US open was transformed by some worse than forecast CPI readings.
Given that a fear of Federal Reserve rate hikes is one of the reasons for the sticky situation the markets have found themselves in this October, a September slowdown in US inflation – one of the most important metrics in regards to the central bank’s long-term plans – was greeted with a palpable sense of relief on Thursday. Both the regular and core readings came in at 0.1%, against the 0.2% and 0.1% seen in August respectively – not the kind of drop that would significantly change the Fed’s plans, but enough to see the Dow Jones avoid a previously promised 350 point plunge. Instead the Dow slipped 70 or so points, leaving it sat the wrong side of 26550.
That the US index managed to sort of staunch Wednesday’s wounds was of little comfort to Europe, with the region’s indices continuing to react to yesterday’s heavy losses. The FTSE fell 120 points, ducking under 7050 to remain at a 6 month nadir, with the DAX down 1% and the CAC slipping 1.3%.
As for the pound and euro, they both benefited from the US inflation miss. Cable climbed above $1.321 for the first time in almost 3 weeks, while the single currency adding another 0.3% against the dollar to hit its best levels in around 9 days. That both were up against the greenback likely contributed to the European indices’ inability to significantly wipe away the red paint.
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