Stocks Slide, Dollar Gains as US CPI Sparks Tightening Fears

By Reuters
November 10, 2021 Updated: November 10, 2021

NEW YORK/LONDON—A gauge of global stock markets edged lower and the dollar built on earlier gains on Wednesday after U.S. consumer inflation surged to its highest since 1990, raising concern the Federal Reserve will tighten monetary policy sooner than expected.

Real yields on U.S. Treasuries slid to record lows and gold prices reversed course to rise more than 1 percent as another jump in the consumer price index in October bolstered the metal’s appeal as a hedge against inflation.

CPI jumped 0.9 percent after climbing 0.4 percent in September, the Labor Department said, as the largest gain in four months boosted the index’s annual increase to 6.2 percent. It was the biggest year-on-year rise since November 1990 and followed a 5.4 percent leap in September.

The U.S. consumer price index rose 0.9 percent in October after gaining 0.4 percent in September, accelerating 6.2 percent in the 12 months through October, the largest year-on-year advance since November 1990. Economists polled by Reuters had forecast the overall CPI rising by 0.6 percent and the core CPI by 0.4 percent.

“It’s clear that the rate of inflation and the persistence of elevated inflation are much more than what policymakers and markets had expected,” said Joseph LaVorgna, chief economist for the Americas at Natixis in New York.

Paul Nolte, portfolio manager, Kingsview Asset Management in Chicago, said the Fed is now behind the curve. “They may now be forced into raising rates sooner rather than later,” he said.

MSCI’s all-country world index slid 0.21 percent while but the broad pan-European FTSEurofirst 300 index rose 0.28 percent.

On Wall Street, the Dow Jones Industrial Average fell 0.11 percent, the S&P 500 eased 0.15 percent and the Nasdaq Composite declined 0.44 percent.

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.605 percent to 94.577.

The euro fell 0.66 percent at $1.1515, while the yen traded up 0.91 percent at $113.8800.

The yield on 10-year Treasury Inflation Protected Securities dipped as low as -1.243 percent and the yield on 30-year slid as low as -0.607 percent, both records, in morning trading.

The 10-year TIPS breakeven rate was last at 2.72 percent, indicating the market sees inflation averaging about 2.7 percent a year for the next decade.

The benchmark 10-year U.S. Treasury yield rose 6.6 basis points to 1.5153 percent after touching a six-week low of 1.4150 percent on Tuesday.

Euro zone bond yields also ticked up, with Germany’s 10-year yield, the benchmark for the bloc, up 3.4 basis points at -0.259 percent, above a seven-week low of -0.299 percent touched on Tuesday.

Oil prices edged lower after U.S. crude stocks rose modestly, a day after an industry report suggested inventories had tightened.

Brent crude fell from $0.22 to $84.56 a barrel. U.S. crude lost $0.44 to trade at $83.71 a barrel.

Brent crude futures were at $84.41 a barrel at 10:49 a.m. EST (1549 GMT), down 37 cents. U.S. West Texas Intermediate (WTI) crude futures fell by 79 cents, or 0.9 percent, to $83.36.

Spot gold gained 1.1 percent to $1,851.00 per ounce.

By Herbert Lash and Carolyn Cohn