Markets eye US inflation data as oil surges on Middle East tensions

Global investors turned their attention to upcoming US inflation figures on Wednesday as oil prices extended gains on Middle East supply risks and volatility gripped technology shares, with traders seeking clarity on the Federal Reserve's interest rate trajectory. The US inflation report, due Wednesday, is expected to show accelerating price pressures driven by rising energy costs, offering fresh insight into the Federal Reserve's monetary policy pathway. Money market pricing indicates a 78% probability that the central bank will maintain its current rates this month.

New York Fed President John Williams said he still thinks the bank should hike rates once more this year but no further rate hikes will be necessary, expecting inflation to decline significantly next year. The US 10-Year Treasury bond yield dropped by one basis point to 5.21% following Williams' statements, while the dollar declined 0.1% in value to 102.2 and gold dropped 0.1% to $4,158 per ounce.

Oil climbs on supply risks

December-delivery Brent crude rose 0.6% to $106.3 a barrel on Wednesday following an attack on Saudi Arabia by Yemeni Houthi militias. The International Monetary Fund warned that rising borrowing costs during a period of high debt burdens exert mounting pressure on public finances, urging fiscal consolidation measures to be implemented. OPEC's daily crude oil production increased by 920,000 barrels month-on-month in September to nearly 20.1 million barrels, leading to downward revisions in global oil demand growth for this year and upward revisions for next year.

Tech selloff weighs on banks

The New York Stock Exchange traded negatively on Tuesday due to a broader selloff in chipmaker stocks, though American indexes started Wednesday on a positive trend. Micron Technology shares dropped 3.6%, SK Hynix fell 3.2%, AMD declined 1.9%, and Western Digital's shares were down 1.6%. Major US banks reported mixed financial results, with JPMorgan Chase's profit and revenue falling short of expectations and its shares dropping by nearly 1%. Citigroup shares contracted 5.6% despite profit and revenue exceeding estimates, while Goldman Sachs shares fell 0.2%. Wells Fargo posted better-than-expected profits but its revenue did not meet expectations, losing the bank 3.1% in stock value.

US existing-home sales grew 1.5% in September, beating expectations of a 0.8% decline. The Dow Jones Industrial Average fell 0.35% and the Nasdaq Composite declined 0.15%, while the S&P 500 traded flat on Tuesday.

Asia gains as China data beats estimates

European stock markets also saw selloffs amid tech stock declines, with Dutch chipmaker ASML's shares dropping 4.1%, German tech firm Infineon's shares declining 2.6%, Aixtron shares falling 3.4%, and Suss Microtec shares contracting 3.5%. Germany's BMW posted a 6.3% drop in global sales in the third quarter to 551,072 units as sales in China declined, but the carmaker's shares closed Tuesday up 2.4%, led by European electric vehicle demand. Germany's consumer price index rose 0.6% on a monthly basis and 3.3% year-on-year, within estimates.

The UK's FTSE 100 fell 0.06%, while Germany's DAX 40 and France's CAC 40 declined 0.07%. Italy's FTSE MIB 30 traded flat, though European indexes started Wednesday on a mixed trend.

Near the close of trading on Wednesday, Asian equity markets traded mostly higher. China's producer price index rose 5% on an annual basis, marking its fastest rise since June 2022 and rising above the 3.8% estimate, with rising energy prices contributing to the increase. China's CPI rose 0.9% on an annual basis, accelerating moderately compared to August but coming in below estimates, revealing that domestic demand remained sluggish.

The country's exports and imports surged above expectations by 36.3% and 31%, respectively, gaining momentum compared to August. "Chinese economic policymakers may have to implement further policy support to reach short- and long-term growth targets," analysts said. The People's Bank of China cut the one-year lending rates of three policy banks by 25 basis points on Sept. 29. South Korea's Kospi rose 1.2%, Japan's Nikkei 225 gained 0.9%, and Hong Kong's Hang Seng was up 0.2%, while China's Shanghai Composite traded flat.