Source: Wind

European and American stock markets fell on November 12th, with the US dollar and US bond yields rising sharply, non-USD currencies generally falling, and most commodities experiencing declines.

$Dow Jones Industrial Average (.DJI.US)$ Dropped 382.15 points to 43,910.98 points, down 0.86%.$S&P 500 Index (.SPX.US)$ Down 0.29%, closing at 5,983.99 points.$Nasdaq Composite Index (.IXIC.US)$Closed down 0.09%, at 19,281.40 points. The technology-driven nasdaq index and s&p 500 index both ended a five-day rise.

Major stock indices in europe fell across the board. $UK FTSE100 Index (.FTSE.GB)$ Down 1.22%, reported at 8,025.77 points; $DEGUODAXZHISHU (.DAX.US)$ Down 2.13%, closing at 19033.64 points; $France CAC40 Index (.CAC.FR)$ Down 2.69%, closing at 7226.98 points.

$U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ Increased by 12bp to 4.432%, $XAU/USD (XAUUSD.CFD)$ Down 0.8% to $2597.53 per ounce.

Data shows that about three-quarters of stocks on the nyse fell on Tuesday, while the proportion of falling stocks on the nasdaq was about 63%. Measured by volume, falling stocks on the nyse accounted for about 71% of total volume, while falling stocks on the nasdaq accounted for about 59.5% of total volume.

The total volume on the nyse on Tuesday was significantly lower than usual, with the volume in the last trading session only around 70% of the average volume over the past 30 days, while the nasdaq exceeded 95% of its average volume.

On Tuesday, the most popular trade from the previous days was among the most obvious losers. Small cap stocks, seen as potential beneficiaries of certain policies, were generally under pressure, with the e-mini russell 2000 index falling about 1.8%. On Tuesday,$Tesla (TSLA.US)$the stock price fell by more than 6%.

$USD (USDindex.FX)$ On Tuesday, it rose 0.4% to $105.95. So far this month, the usd has appreciated by 1.9% against a basket of major currencies. $USD/JPY (USDJPY.FX)$ It rose by 0.5% to 1 USD per 154.5 Japanese yen. This is the lowest exchange rate of the yen against the dollar since July 2024.

Citi stated that investors' excitement may be preparing for a short-term market pullback. The quantitative research team of this investment company said in a report to clients that current stock market positions are 'stretched', and the risks of ' $Russell 2000 Index (.RUT.US)$ The positions of the S&P 500 index and

are accumulating.' The positions of the S&P are currently at the highest level in the past three years, and the positions have also stretched to the Nasdaq and E-mini Russell 2000 index. Profits for both the S&P and Russell are rising, which may lead to short-term profit-taking and could limit further market gains.

Mark Marek, Chief Investment Officer of Siebert, stated that the stock market may have already anticipated some events. He added that since the market has eliminated some uncertainties, some core economic headwinds are resurfacing.

Marek stated: 'What could be driving today's large drop is a bit of fatigue; we are all concerned about debt and deficits. When deficits become a problem, it may be a reason to ease off the gas.'

Thomas Barkin, President of the Richmond Federal Reserve, stated on Tuesday that the U.S. economy is performing well, and the Federal Reserve is prepared to respond to either economic improvement or recession.

Barkin stated, "The current state of the economy is good, interest rates have moved away from recent highs, but they have also moved away from historical lows, and the Federal Reserve is capable of responding appropriately regardless of how the economy evolves." "This is a good place to be after experiencing the challenges of the past few years."

However, he declined to predict the trajectory of interest rates and was unwilling to reveal how forcefully the Federal Reserve might act.

Market participants will next focus on the consumer and producer price index data scheduled to be released later this week. JPMorgan stated that the better-than-expected inflation data released on Wednesday may not affect Wall Street's risk appetite.

The company wrote in its report on Tuesday, "We believe investors will not care about any data warming up because there is one more CPI data release before the Federal Reserve meeting in December."

"In fact, it is unlikely that investors will shift to a more cautious investment stance. We believe the Federal Reserve will only take action if inflation rises back to 4%,” the company added.

The New York Fed disclosed that U.S. one-year inflation expectations for October fell to 2.87%, the lowest since October 2020; the previous value was 3.00%. The median of inflation uncertainty for three-year and five-year terms has decreased. The median expectation for a rise in the unemployment rate in the U.S. over the next year fell to 34.5%, the lowest since February 2022.

Focusing on CPI data.

As the dust settles on significant political events in the USA and the Federal Reserve's interest rate cut in November, market attention gradually shifts to the Federal Reserve's policy meeting in December. The uncertainty of future U.S. policy directions and the mixed performance of recent economic data have led to significant divergence in the market regarding the Federal Reserve's interest rate decision in December.

At 21:30 Beijing time on November 13, the USA will announce the October CPI data. As the first major data following the November interest rate meeting, it may impact the Federal Reserve's path to rate cuts.

The U.S. Department of Labor previously announced that the U.S. September CPI rose 2.4% year-on-year, the smallest year-on-year increase since February 2021, just a step away from the Federal Reserve's 2% inflation target. The core CPI for September increased 3.3% year-on-year, accelerating by 0.1 percentage points compared to August.

The market expects that the year-on-year increase for the U.S. CPI in October will be 2.6%, higher than the 2.4% increase in September. The core CPI is expected to grow 3.3% year-on-year, remaining flat with September, continuing the previous sticky performance.

At the same time, the market expects the U.S. October CPI and core CPI to rise 0.2% and 0.3% month-on-month, respectively. Bank of America Merrill Lynch stated that this increase is unlikely to have a significant impact on interest rates. Although there have been pressures for price increases during the economic recovery, this will not lead to significant changes in inflation expectations nor pose a threat to the Federal Reserve's inflation target.

Overall, if the U.S. October CPI data is lower than expected, it indicates that current inflation is relatively controllable, which may put pressure on U.S. treasury yields and the dollar. If the CPI data shows an unexpected rebound, it could trigger market concerns about a resurgence of high inflation, potentially hindering future rate cuts, and leading to continued gains in U.S. treasury yields and the dollar.

According to Boris Schlossberg, a macro strategist at asset management company BK Asset Management, the trend of super-core inflation will become key to future policy shifts for the Federal Reserve. Compared to last year, consumer spending has slowed down somewhat, but household consumption still benefits from a tight labor market, and corporate hiring demand remains stable, which supports a salary growth rate of around 4.0%, above the 3.5% sustainable inflation target range. He believes that the path for inflation to return to 2% is not smooth.

In fact, the market has already noticed the risks of rising inflation. The recent strong increase in the yield of U.S. 10-year treasury notes reflects the market's expectations for a second inflation in the USA. According to Wind data, since October, the yield of 10-year U.S. treasury notes has cumulatively increased by more than 15%. The strengthening of treasury yields further reinforces the strength of the dollar.

Henry Allen, a strategist at Deutsche Bank, stated in a recently published research report that the risk of rising inflation is not a groundless worry, and some investors have already realized this. As of last Friday's close, the two-year inflation swap in the USA has risen from the recent low of 1.98% on September 6 to 2.62%.

According to CME's "FedWatch," the probability of the Federal Reserve maintaining the current interest rates unchanged until December is 34.9%, while the cumulative probability of a 25 basis point rate cut is 65.1%. Moreover, the market has begun to look ahead to the potential end of this round of easing by mid-next year, which would be nearly a year earlier than the FOMC's forecast in September.

The Federal Reserve will speak intensively.

Meanwhile, this week, Federal Reserve officials will speak intensively, and the market will seek more clues about future interest rate policies. The most closely watched event is the speech by Federal Reserve Chairman Powell on November 15.

On November 15, Federal Reserve Chairman Powell will be invited to participate in a dialogue titled "Global Perspective." Investors will focus on his views on subsequent U.S. inflation trends, economic performance, and future monetary policy.

Compared to the dovish statement from the September meeting, Powell's attitude in November has slightly turned hawkish. In the post-meeting news conference, Powell stated that the fight against inflation is not over, core inflation remains somewhat high, and the job market continues to cool very slowly. The Federal Reserve will continue to cut rates, but if inflation cooling stagnates and the economy is strong, rate cuts can proceed more slowly.

At the same time, Powell also stated that the assessment of data will continue to determine the "pace and destination" of interest rates. However, with the formation of new government proposals, the FOMC will begin to estimate their impacts on stabilizing inflation and maximizing employment.

Editor/Rocky