CPI unexpectedly slowed, U.S. stocks rebounded, the Nasdaq once rose by more than 2%, and cryptocurrencies repeated their rise and fell.

Written by: Zhang Yaqi, Dong Jing, Li Dan

Source: Wall Street Insights

U.S. CPI inflation unexpectedly slowed in November, released before U.S. stocks opened on Thursday, with core CPI increasing 2.6% year-on-year, the lowest growth rate in four years. The data is favorable for the Federal Reserve to cut interest rates next year, and investors currently expect the Fed to cut interest rates at least twice next year. After the announcement of CPI, the three major U.S. stock indexes opened higher; the U.S. dollar index turned lower and hit a daily low; U.S. Treasury bond prices accelerated and yields hit a daily low; cryptocurrency gains expanded.

However, the intraday gains in U.S. stocks diminished. The Nasdaq, which had risen by more than 2% in early trading, rose by more than 1% in midday trading. The S&P 500, which had risen by 1.4% in early trading, narrowed its midday gain to less than 0.9%. The Dow Jones Industrial Average, which had risen by nearly 480 points or 1% in early trading, turned negative in short-term midday trading.

Cryptocurrencies repeated Wednesday's surge and retreat, failed to rebound again, and turned negative during the session. Bitcoin rose above $89,400 before the U.S. stock market opened, setting a new daily high. U.S. stocks turned lower at the end of early trading, and fell below $85,500 at the beginning of midday, setting a new daily low. It fell nearly $5,000, or more than 4%, from the daily high.

The US Dollar Index turned higher in the early trading session of US stocks. U.S. Treasury yields maintained a downward trend.

The following content was released at 21:48 Beijing Time on the 18th:

U.S. inflation unexpectedly eased, with the November CPI rising 2.7% year-on-year versus the expected 3.1%, and the November core CPI climbing 2.6% year-on-year compared to the forecasted 3%.

Following the release of the data, Nasdaq futures surged over 1% intraday, S&P 500 index futures gained 0.62%, and Dow futures rose 0.34%; the US Dollar Index edged lower in the short term, down 0.12% on the day. U.S. Treasury bonds jumped to their intraday high. The decline in spot gold narrowed sharply.

Meanwhile, gold prices hovered near record highs, and spot palladium broke through the $1,700 per ounce mark for the first time since February 2023, surging over 3% intraday. Oil prices erased their gains after Trump delivered remarks that did not escalate geopolitical tensions.

- Nasdaq futures rallied over 1% intraday, S&P 500 index futures advanced 0.62%, and Dow futures rose 0.34%.

- Micron Technology jumped over 13% in pre-market trading.

- The US Dollar Index slipped in the short term, down 0.12% on the day.

- EUR/USD rose about 10 pips in the short term, currently trading at 1.1731.

- The Japanese yen fell 0.1% to 155.89 against the US dollar.

- U.S. Treasury bonds surged to the intraday high.

- The UK 10-year government bond yield dropped 4 basis points to 4.47%.

- Brent crude oil climbed 0.2% to $59.78 per barrel.

- Spot gold fell 0.4% to $4,322.42 per ounce.

- Spot palladium broke above $1,700 per ounce for the first time since February 2023, up over 3% on the day.

21:45

After the data release, Nasdaq futures rose more than 1% intraday, S&P 500 index futures gained 0.62%, and Dow futures increased 0.34%; the US Dollar Index moved lower in the short term, down 0.12% on the day. U.S. Treasury bonds surged to their intraday high.

The decline in spot gold narrowed significantly.

### 21:20

The European Central Bank (ECB) announced it would keep interest rates unchanged, stating that its rate decisions will be based on an assessment of the inflation outlook and related risks. EUR/USD jumped about 10 pips in the short term and was last traded at 1.1731; the Euro Stoxx 600 Index maintained its upward trend following the ECB rate decision, rising 0.29% currently.

Traders' bets on ECB interest rates remained steady, with expectations that rates will be hiked by 3 basis points in 2026.

### 20:34

After the Bank of England delivered a hawkish 25-basis-point rate cut, the 10-year UK government bond yield edged up 1 basis point to 4.48%. This came as the central bank issued more cautious forward guidance and emphasized that "judgments around further easing will become more difficult".

Driven by Micron Technology's over 13% pre-market surge, the shares of the Magnificent Seven tech stocks rebounded in pre-market trading from Wednesday's losses. NVIDIA rose 1.3%, Tesla climbed 1.5%, Alphabet gained 1.1%, Amazon advanced 0.8%, Meta increased 0.7%, Microsoft rose 0.6%, and Apple was roughly flat.

### Concerns Over Tech Stock Valuations and AI Returns

While Micron Technology's earnings guidance boosted the chip sector, market worries over tech stocks have not fully dissipated. The Nasdaq's reversal from gains to losses on Wednesday reflected investors' reassessment of companies at the forefront of the artificial intelligence (AI) boom, questioning whether their lofty valuations and ambitious capital expenditures are sustainable.

Frank Thormann, fund manager at Schroders Investment Management, pointed out that investors have seen limited disclosure of AI-driven revenues, profits, or cash flows. He warned that growing market concerns are emerging that the actual returns from AI may fail to match the current market enthusiasm.

Traders are closely awaiting the release of U.S. inflation data on Thursday for clues about the interest rate path, but the reliability of this batch of data may be significantly undermined by disruptions caused by the U.S. government shutdown.

Due to the government shutdown, most price data for October could not be collected, and data collection work for November was also forced to be postponed. The upcoming November Consumer Price Index (CPI) report will only provide a "partial snapshot" of inflation, with monthly change data missing for most price categories. This lack of data integrity may increase the difficulty for the market to interpret the policy outlook.

### Updates Before 17:00

#### Safe-Haven Assets and Commodity Trends

Driven by geopolitical tensions and market uncertainties, gold prices stabilized near record highs in the Asian trading session on Thursday, after rising 0.8% on Wednesday. Spot gold has surged nearly two-thirds this year, on track to post its best annual performance since 1979. Platinum extended its strong rebound, with gains once hitting as much as 4%.

Spot palladium broke through the $1,700 per ounce mark for the first time since February 2023, surging over 3% intraday.

In the oil market, Brent crude, the global benchmark, erased its earlier gains. In a televised speech at the White House, Trump made no mention of the latest developments in Venezuela, thus easing market fears of escalating geopolitical anxiety.

In the forex market, the Japanese yen edged higher against the U.S. dollar. Markets widely expect the Bank of Japan to raise interest rates to their highest level in three decades on Friday. The U.S. Dollar Index saw minimal changes.

#### Divergence in Global Central Bank Policies

The policy paths of major global central banks are diverging. For the ECB, markets expect it to keep interest rates unchanged for the fourth consecutive meeting, and the new economic projections are likely to highlight a solid growth outlook and reinforce confidence that inflation will not deviate excessively from policymakers' targets. In contrast, the Bank of England is expected to announce a rate cut before Christmas, as its focus has shifted from inflation to the struggling UK economy and job market.

In Asia, the Bank of Japan's policy move is in the spotlight, with traders betting that it will raise interest rates on Friday to the highest level in three decades. This expectation has underpinned the strength of the Japanese yen.

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