October 11, 2022
United States:
JPMorgan Says Too-Hot CPI Would Put Stocks at Risk of 5% Tumble
With a dovish Federal Reserve pivot seemingly off the table after last week’s employment report, risks for speculators are running high before Thursday’s release of the consumer price index. Anything above the prior reading of 8.3% would be big trouble for the stock market, according to JPMorgan Chase & Co.’s trading desk.
“This feels like another -5% day,” the team led by Andrew Tyler wrote in a note Monday, noting that the S&P 500 dropped 4.3% on Sept. 13, when August’s inflation reading came in hotter than expected. The scenario is the worst case laid out as a rough guide for clients seeking to navigate the heightened market volatility around economic data.
Europe:
‘Fire Sale’ Risk in Bonds Pushes BOE to Step Up Measures
The Bank of England is expanding the scope of its bond purchases to include inflation-linked debt in an effort to avert what it called a “fire sale” that threatens financial stability.
It’s the second time this week the central bank has added to its arsenal of tools aimed at curbing market turbulence. The move, coming on the heels of Monday’s record selloff in inflation-linked debt, had the immediate effect of bringing some calm to the market.
Asia:
Trading Drought Worsens in Japan’s Broken Bond Market
In a fresh sign of Japan’s dysfunctional bond market, the 10-year benchmark failed to trade for a third consecutive session Tuesday, the longest such streak since 1999.
The Bank of Japan’s overwhelming presence in the JGB market where it’s the biggest buyer under its curve control policy has exacerbated liquidity issues and led to a deterioration in market functioning. A gauge of liquidity stress in the Japanese bond market has hit levels last seen over a decade ago.
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