Breakfast Bites - Hotter CPI does nothing to deter markets

Rise and shine everyone.

With the CPI behind us now, the next big event is the Monthly Options Expiry on Friday.

Yesterday’s CPI certainly came out to be a surprise with numbers coming in hotter than expected, and core goods inflation accelerating on a spike in Used Vehicles prices (more below).

Nevertheless, the market didn’t seem deterred and the S&P 500 ended up making yet another high. Even a less than stellar 10Y auction pushing yields up didn’t seem to put pressure on equities.

The speculation may continue given that the market is now seeing an asymmetry – with a higher probability of a Fed cut, than a hike. But, what we want to see is a more sustainable price increase for the broader market.

Look out for Retail Sales and PPI numbers tomorrow. A weaker Retail Sales number could fuel the market.

Markets are happy in Europe as well - the German DAX reached 18,000 for the first time, while the Euro Stoxx 50 index hit 5,000, a level not seen in 24 years. Recent comments from European Central Bank (ECB) officials, including Villeroy, Kazaks, Wunsch, and Holzmann, have drawn attention as the coo dovish almost assuring the market of cuts in June.

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