A look at the day ahead in European and global markets from Wayne Cole.
Who knew a statistical difference of 0.228 ppt could add $3 trillion to the value of S&P 500 and Nasdaq stocks, and heaven knows how much to Treasuries as yields boasted their biggest daily drop in more than a decade. It's not often you see the long bond up 3 points in price.
All it took was for U.S. core CPI to print at +0.272% and not +0.5%. That came courtesy of disinflation in goods prices led by second-hand cars and clothing, helped by slowing rents, airfares and some statistical voodoo on health insurance.
Naysayers will note trimmed mean measures of core inflation are not so benign, service inflation and employment costs are still running hot, and the labour market is uncomfortably tight.
Also, the more Treasury yields fall the looser U.S. financial conditions become, something the Fed might not welcome given inflation of 7.7% is not exactly near its target of 2%.
But, for now, the CPI seems to have locked in 50 basis points from the Fed in December and narrowed the odds that rates will peak under 5% rather than the feared 6%.
That, if sustained, will lessen pressure on other central banks to keep tightening. Even Euribor rallied as much as 19 ticks as the market lowered the likely peak for ECB rates, a trend echoed across futures markets.
The dollar has recouped a little of its losses today in Asia, but surprisingly little given the scale of the retreat. A host of major chart levels have been breached and people will be wondering if this is it for the long USD bull rally, and equally for the bear market in bonds.
If so, it would be a huge relief to the EM countries having to run down reserves to protect their currencies. Come to that, it would also be a major positive for commodities priced in USD. So there's a lot riding on the next few days.
What to watch out for on Friday:
A chorus of ECB officials take the stage, but they've tended to sing from the Bundesbank hymn sheet recently and markets would surely prefer some breezy show tunes.
UK GDP is forecast to fall 0.5% q/q in Q3, likely the herald of a recession that could last two years if the BoE is correct.
Note the cash U.S. bond market is shut for Veterans Day.