US CPI data was notably higher than expected with the headline rate at 31-year highs at 6.2%
US and global inflation concerns intensified after the data with a sharp increase in volatility across asset classes. US bond yields strengthened after the data with the 10-year yield above 1.55%.
Wall Street stocks lost ground, although with a close above intraday lows. Risk appetite held steady in Asia on Thursday amid some relief over Chinese trends.
After initial hesitation, the dollar posted sharp gains to the highest level since July 2020. EUR/USD dipped to 15-month lows around 1.1470.
Sterling edged lower with global moves dominating the UK currency and GBP/USD lows around 1.3400. Commodity currencies lost out to the strong dollar and unease over central bank policy risks.
The much weaker than expected domestic jobs data pushed the Australian dollar to 1-month lows.
Oil prices dipped sharply amid inflation concerns and speculation over US action to release reserves. Inflation fears triggered strong demand for precious metals, but gains were undermined by dollar strength.
Bitcoin and Ether dipped very sharply from fresh record highs before stabilising.
Euro-zone equities drew support from solid earnings data during Wednesday and there was some relief over a measured Wall Street reaction to the much higher than expected US inflation data.
Optimism over earnings data provided strong initial support to major UK stocks on Wednesday. The FTSE 100 index was also resilient in the face of higher US inflation and a sharp retreat in oil prices with the FTSE 100 index posted a 0.7% gain to 20-month highs.
Wall Street stocks were unsettled by the US inflation data, especially with the risk of higher interest rates, although the overall response was measured with the S&P 500 index declining 0.8% as confidence in earnings held firm.
US futures edged higher on Thursday and there was a generally positive mood in Asia as Chinese real-estate developer Evergrande made further coupon payments.
Japan’s Nikkei 225 index gained 0.6% as the dollar posted gains, but the Australian ASX index declined 0.55% amid weakness in commodities.
China’s Shanghai index gained 1.15% with the Hong Kong Hang Seng index 1.1% higher in late trade.
Stock to watch today
DS Smith has corrected lower in recent months towards some important levels of support. The shares created a gap on the 25th February 2021 before moving on to new highs at 456p. We also have a 38.2% Fibonacci support level that has formed at 374p. So we have two strong support levels that have been tested in recent sessions, we have also noticed a small uptick in volume on the approach to support. We believe this could provide a platform for further gains.
CCM Opinion: BUY
Buy between 375 – 390p
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