Morning Brief – Better news

Following the less than expected CPI inflation data yesterday from the United States economy the lessoning of the quarantine period for inbound travellers to China had helped sentiment.

The welcome news has helped risk trades, such as the US dollar and particularly stocks, and we are seeing things pick up now with S&P500 futures up by 0.6%, on the day, and the Nasdaq the same.

China has said that it will reduce the quarantine period for inbound travellers to 5 days, either in a hotel or government quarantine facility, followed by three days confined to home.

The current rules require 10 days of quarantine in total. Meanwhile, officials have also announced that the system penalising airlines for bringing virus cases into the country will also be scrapped, which reaffirms the earlier rumours last week.

Another focus is the strengthening yen currency today. The Japanese Yen soared as the US Dollar sank across the board in a risk-on rally in the aftermath US CPI printing below expectations.

Fed presidents from many districts expressed their views, including Patrick Harker, Lorie Logan, Mary Daly, Loretta Mester and Esther George. The overall message was that a measured approach would seem appropriate going forward, but that financial conditions needed to remain tight for the foreseeable future.

Today, we also had remarks out of Japan, both Finance Minister Suzuki and his underling, head of FX at the Ministry, Kanda, to the effect of not wanting rapid FX moves.

Earlier today we had inflation data from Japan. Data showed that Producer prices in Japan jumped 9.1% year-on-year in October 2022, slowing from September’s upwardly revised 10.2% gain but posting above expectations for a sharper drop to 8.8%, as high commodity prices and a weak yen continued to inflate input costs for companies.

Still, October’s figure was the lowest reading since January, possibly reflecting the downward trend in global inflation.

Upward price pressures came from nearly all components, with notable increases in electric, power, gas & water (43.2%), minerals (27.5%), iron & steel (22.4%), metal products (13%) and pulp, paper & related products (9.5%). On a monthly basis, producer prices increased 0.6% in October, slowing from an upwardly revised 1% rise in September.