Thursday October 13th

U.S. stock markets index futures fell Thursday morning, erasing earlier gains, after a key consumer inflation report came in hotter than expected, signaling that the Federal Reserve will likely continue with aggressive interest rate hikes. Futures for the Dow Jones Industrial Average fell 530 points, or 1.80%. S&P 500 and Nasdaq 100 futures slumped 2.18% and 2.97%, respectively. The yield on the 10-year U.S. Treasury spiked above 4% as bonds sold off - yields are inverse to price. The reversal in early gains came after the September consumer inflation report was higher than economists expected. The consumer price index increased 0.4% for the month, more than the 0.3% estimate from Dow Jones. On an annual basis, inflation was up 8.2%. The report signals that inflation is a persistent problem even amid large interest rate hikes from the central bank. Going forward, the Fed will likely have to keep delivering increases and keep rates high until there are signs that inflation is cooling off. “A lot of times you can try to find a silver lining in some of the numbers – I can’t. I think that’s why you’re seeing this truly atrocious reaction right now,” said Steve Sosnick, chief strategist at Interactive Brokers. Stock futures had surged as the British pound gained more than 1% versus the U.S. dollar on a report that the government there may be rethinking a tax cut plan that had exacerbated a decline in the currency to the lowest in decades at the end of September, putting global markets on edge. Thursday’s CPI report comes a day after the government said the producer price index, another inflation gauge, rose more than expected. Investors also digested minutes from the September Federal Reserve meeting, released Wednesday. The minutes showed the central bank expected to keep hiking interest rates until it sees receding inflation. But one comment made some think the Fed might instead slow the rate hikes, if not roll them back, if financial markets tumult continued. Shares in the Asia-Pacific fell on Thursday as investors await inflation data from the U.S. due later stateside. The Nikkei 225 in Japan was 0.6% lower at 26,237.42 and the Topix was down 0.77% at 1,854.61. South Korea’s Kospi shed 1.8% to 2,162.87 and the Kosdaq lost 2.99% to 651.59. The Hang Seng index in Hong Kong traded 1.58% lower in the final hour of trade, with the Hang Seng Tech index down 3%. Mainland China’s stocks gave up gains — the Shanghai Composite was down 0.3% at 3,016.36 and the Shenzhen Component shed 0.192% to 10,817.67. In Australia, the S&P/ASX 200 closed down 0.07% at 6,642.60. Oil prices firmed on Thursday, finding continued support from an OPEC+ decision last week to cut supplies, as the International Energy Agency warned that those cuts may push the global economy into recession. Brent crude futures rose 21 cents, or 0.2%, to $92.66 a barrel. U.S. West Texas Intermediate crude was up 14 cents, or 0.2%, at $87.36 a barrel. Gold prices were little changed on Thursday, as investors withheld large bets ahead of U.S. inflation data later in the day that is expected to offer further clarity on the Federal Reserve’s rate hike trajectory. Spot gold was steady at $1,674.86 per ounce. U.S. gold futures rose 0.3% to $1,681.70.