Morning Note: A round-up of market news.

Market News

The August core PCE deflator, the Fed’s key inflation measure, came in at 0.1%, a touch below the 0.2% rise expected. The year-on-year figure was 2.2%, versus 2.3% expected, and 2.5% in the previous month. The Core inflation reading of 2.7% was in line with forecast. Fed rate cut expectations were basically unchanged on the week at 75 basis points of additional cuts by year end. The 10-year Treasury yields 3.76%, while gold has slipped back from its record high to $2,651 an ounce.

Equities in China and Hong Kong were standout gainers this morning – Hang Seng (+2.0%); Shanghai Composite (+8.0%) – after Beijing’s latest measures to tackle its property crisis. Both iron ore and Chinese developer stocks surged after three major cities eased rules on housing purchases. Brent Crude moved up to $72.50 a barrel, helped in part by ongoing tensions in the Middle East.

The yen strengthened sharply against the dollar from above 146 to below 142 after the victory of Shigeru Ishiba in the Japanese ruling party’s leadership race wrong footed investors and raised expectations of further rate hikes. The Nikkei 225 plummeted by 5%, although the currency move reduces the impact for a Sterling-based investor.

The FTSE 100 is currently little changed at 8,321, with mining and oil stocks outperforming. UK Q2 GDP rose by 0.5% quarter on quarter, slightly below the preliminary reading. UK house prices grew 0.7% in September, Nationwide data showed, beating expectations. Sterling trades at $1.3388 and €1.1985.

Carmakers continue to struggle. Volkswagen has lowered its forecast again for full-year revenue and deliveries, sending the shares down by 5%. Porsche SE has cut its full-year profit guidance, while Aston Margin Lagonda expects earnings to come in below market expectations, sending its shares down by 18%.

Source: Bloomberg