Stocks fall, dollar and Treasury yields edge down after CPI and jobless claims data

By Alun John

LONDON (Reuters) -U.S. share futures dropped, the dollar weakened and benchmark Treasury yields dipped as marginally-above-expectation U.S. inflation data and higher jobless claims did not challenge market bets the Fed will cut rates in November.

Nasdaq futures were last off 0.6% and S&P500 futures dropped 0.4%, slightly extending declines, a day after the S&P 500 index hit a record high.

The consumer price index increased 0.2% last month after gaining 0.2% in August. In the 12 months through September, the CPI climbed 2.4%. That was the smallest year-on-year rise since February 2021, but was above the 0.1% and 2.3% expected by analysts polled by Reuters.

Excluding the volatile food and energy components, the CPI increased 0.3% in September, again slightly above expectations.

Also in the mix was a surge in the number of Americans filing new applications for unemployment benefits last week, partially boosted by Hurricane Helene and furloughs at Boeing (NYSE:BA ) amid a nearly four-week-old strike at the U.S. planemaker.

The data reinforced market expectations that the Federal Reserve will cut rates by 25 basis points at its November meeting, with market pricing reflecting around a 90% chance of such a move.

Ahead of the release, some analysts were concerned about of more substantially higher-than-expected print that would cause the Federal Reserve to not cut rates at its next meeting, building on strong non farm payrolls data last week.

“It's not terrible news, but it's certainly not good news and it just simply indicates that maybe the best gains, the best gains of inflation may be behind us for the next couple months,” said Peter Cardillo, chief market economist, Spartan Capital Securities.

The U.S. 10 year yield dropped marginally after the data and was last flat on the day at 4.07%.

It hit its highest since late July earlier in the day, and has jumped more than 20 basis points in the past week, largely on the back of a Friday's much hotter than expected payrolls data. [US/]

The dollar weakened a fraction and was last down 0.1% against a basket of major peers. Its biggest move was against the rate-sensitive yen, falling 0.6% to 148.43 yen.

The euro was up 0.06% at $1.0947, and the pound was steady at $1.3078.

In Europe, the new French government was set to deliver its 2025 budget late on Thursday with plans for 60 billion euros' ($66 billion) worth of tax hikes and spending cuts to tackle a spiralling fiscal deficit.

The now closely watched spread between French and German government bonds, a gauge of how much premium investors demand for holding French debt, was steady at 76 bps. [GVD/EUR]

Its recent highs have been above 80, but it had stood around 50 bps before President Emmanuel Macron called a parliamentary election in June.

CHINA

Chinese shares continued to be volatile and got a lift early in the Asia session as China's central bank kicked off its 500 billion yuan facility to spur capital markets, a plan it announced in late September as part of a series of stimulus measures.

But the onshore blue-chip CSI300 index failed to hold all those gains and closed up just over 1%.

It had fallen 7% on Wednesday, triggered by investor concern about the lack of details in the stimulus package. [.SS]

Hong Kong's Hang Seng surged over 3%, after slipping 1.3% on Wednesday, and is up 26% this year.

The market's attention is now firmly on a finance ministry press conference on Saturday that will provide details of the stimulus plan.

"We believe the consensus is expecting around 2 trillion to 3 trillion yuan in ... fiscal stimulus measures," Richard Tang, China strategist at Julius Baer, said.

Tang expected additional fiscal measures in coming weeks.

In commodities, oil prices rose as investors contended with rising tensions in the Middle East and the impact on oil supply, as well as a spike in demand as a major storm barrelled into Florida.



Brent crude futures were 1.8% higher at $78.0 a barrel, while U.S. West Texas Intermediate (WTI) futures rose a similar amount to $74.44 a barrel. [O/R]

Gold was 0.2% higher at $2,613 an ounce. [GOL/]

Source: Investing.com