Market Briefing: Risk Sentiment Worsens After Rollercoaster Inflation Reaction
Data released yesterday showed core inflation hitting a four-decade high, bolstering the case for more aggressive action from the Federal Reserve. Odds on back-to-back three-quarter-point hikes at the November and December meetings jumped, and terminal rate expectations climbed close to 5.25 percent – well above the 4.6 percent forecast provided by central bankers in September. The initial reaction in equity and foreign exchange markets aligned with tighter policy expectations. Major indices tumbled and the dollar rose. But a profound reversal began by mid-morning, with stock markets and risk-sensitive currencies whipping upward, sending the S&P 500 to a 2.6-percent daily gain....