Something for everyone in US CPI data

The strong US CPI number has put pressure on the Nasdaq again but has bolstered European markets thanks to the stronger US dollar. 

• US prices rise at a sharp pace
• Inflation debate set to rumble on for months to come
• Gold stuck below recent highs but other commodities on the up

The US CPI print has put the cat among the pigeons, as was to be expected, and opinions and market reaction is sharply divided. There is enough for both sides of the debate in  this update, a reflection of how sharply prices are increasing both year-on-year and month-on-month, and in the core and non-core versions. Clearly, one month’s print cannot be the transitory spike in prices that the Fed thinks will be the case, but nor is it obviously the beginning of a trend. We will only know with the benefit of hindsight, and the mixed and volatile reaction in stocks so far points towards this indecision. At the very least, it does confirm the economic recovery narrative, and this explains why growth names continue to suffer relative to the rest of the market, with the Nasdaq sinking faster than the rest while the Dow and S&P 500 endure more moderate declines. In Europe dollar strength has borne down on the euro and sterling and allowed space for rallies in indices across the continent, another sign that perhaps European markets are the next ‘place to be’ for many investors. 

Rising US yields continue to bolster the dollar and are bad news for gold, but given the strength of the moves today the metal’s performance is more than adequate. But it is still desperately in search of a catalyst to move on above $1840, something that has eluded it over the past week. Other commodities are in much better form however, and oil continues to provide its own strong contribution to price increases as the disruption from the pipeline hacking continues to make itself felt.