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Breakfast Bites - US PCE Inflation expected to slow today

Rise and shine everyone.

The big news today is US Inflation numbers out at 8::30am ET. September US PCE YoY is expected to come in lower at 3.4% vs. 3.5% actual for August. Core PCE YoY is expected to come in lower as well at 3.7% vs 3.9% actual for August.

The big earnings this morning was Exxon and Chevron both delivering beats on Revenues but misses on EPS. Yesterday, Amazon delivered some solid numbers beating on both revenue and EPS.

US Equity Futures are trading higher this morning after taking turn lower yesterday. US Yields are trading higher with the Yield Curve steepening to -0.17%. Gold and Bitcoin pulls back from recent highs. Oil and the US Dollar Index are higher.

Asia and Australia

  • Asia equities mostly higher Friday. Japan set to finish higher but will still end the week lower to track developed markets. Australia bounced back but New Zealand shares slipped again. Solid gains for Greater China, Hong Kong up over 2% now, Seoul and Taipei also bouncing back. India with early gains, Southeast Asia more mixed.

  • Tokyo core CPI rose 2.7% y/y in October, above consensus and previous month's 2.5%. Marks the first strengthening in four months, though still well below the 4.3% peak in January. Ex-fresh food & energy series rose 3.8%, also ahead of consensus 3.7% after September was revised to 3.9% from 3.8%.

  • Profits at industrial firms in China for September increased 11.9% y/y for a second straight month, following a 17.2% surge in August, which was the first expansion in more than a year. Profits fell 9% y/y for the first nine months, narrowing from 11.7% decline in Jan-Aug with pace of decline narrowing for seventh consecutive month.

Europe, Middle East, Africa

  • European equity markets mostly higher, but notable underperformance for French CAC amid selloff in Sanofi.

  • As expected, the ECB decided to hold rates steady in yesterday’s meeting with very little new information coming out of the meeting. It would seem that any further decisions now would be deferred until December when the next set of forecasts are due. They highlighted the ease inflation due to base effects but, no focus rising oil prices. As for the balance sheet run-off, ECB President Lagarde mentioned that they had not really discussed the PEPP program and talked about rates being pushed higher due to the US.

  • UK bank stocks under pressure after weak earnings from NWG-GB rounded off challenging week for the sector. Q3 update showed downgrade in profit outlook after it reported weaker-than-expected net income

  • Spain’s GDP came in lower at 0.3% QoQ vs. 0.44% previously, while Industrial Sales in Italy fell to -5% YoY from -1.6% in the previous month.

The Americas

  • Exxon Mobil Corp. boosted quarterly dividends more than expected to 95 cents per share and posted a surprise cash flow increase, reaping the benefits of strengthening crude prices and US oil-refining margins. Third-quarter free cash flow more than doubled from the prior period to $11.7 billion, far in excess of the $9.36 billion average estimate.

  • Amazon yesterday reported Q3 operating income of $11.19 bln vs prior guidance of $5.5-8.5 bln. AWS (Amazon’s Cloud Services) segment sales rose 12.3% yr/yr to $23.06 bln and Advertising Services segment revenue grew +25% CC (constant currency) to $12.06 bln. Despite a downside guidance on Q4 Revenue, the stock price traded higher after hours and in pre-market this morning.

  • First print of Q3 GDP showed annualized growth of 4.9% q/q fastest in nearly two years and above consensus for 3.8%. Core PCE price index of 2.4% was 0.1pp below estimates. Report saw personal consumption up 4%, in line with consensus but also highest in two years.

  • Initial jobless claims of 210K in line with consensus, while prior week revised up 2K to 200K. Continuing claims for week to 14-Oct of 1.790M above consensus for 1.735M and prior week's 1.727M print (was 1.734M).

  • BoFA Weekly Flows: $29.2bn to cash, $2.2bn to bonds, $0.5bn to gold, $2.1bn from equities

Chart of the Day

According to this chart, it would seem that the recent spike in oil due to geopolitical event is taking a benign path. While we are seeing higher oil prices, the Middle East war itself, has had a marginal impact. Higher oil prices continue to be a function of overall tight supply and OPEC+ decisions.


(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)


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