Inflation cools
Markets breathed a huge sigh of relief overnight as US inflation finally begins to cool.
The annual rate of inflation dropped from 8.2 per cent to 7.7 per cent, according to the Bureau of Labor Statistics.
Importantly, core inflation for the month of October came in at just 0.3 per cent, with inflation measures now cooling across the board.
Source: BLS
Energy and food inflation continue to ease from their punishing highs, driven by supply issues.
Goods inflation is now falling away, with used car prices experiencing outright deflation.
A major concern previously had been the pace of 'sticky' services inflation, but this is mainly now being driven by shelter, which posted the highest monthly rate of inflation since 1990.
However, rents are clearly a lagging indicator, and a slew of other market data point to falling rents ahead.
Nominal wages growth remains strong, especially for those prepared to change jobs.
This is hardly a pressing issue in Australia, with wages growth overall remaining tepid, as flagged by the Reserve Bank's Michele Bullock in a speech this week.
Yields fall
It was always a chance, and stocks dd indeed post a massive "rip your face off" style of relief rally overnight, with the NASDAQ up 6 per cent, and the S&P 500 up by 5.5 per cent.
Yields also fell significantly.
Financial markets are still pricing for a terminal Federal Funds rate of 4.85 per cent, before rate cuts begin to kick in from November 2023.
In Australia, the Reserve Bank may gain some further comfort that global inflationary momentum is easing off.
Australia's 3-year bond yield fell to 3.08 per cent, having traded at close to 3.8 per cent only a few weeks ago.
A major sigh of relief for financial markets, then, after some alarming inflation prints over recent times.
The Aussie dollar is trading all the way back up at 66.2 US cents, putting some of the more extreme imported inflation arguments to bed.
