Hot US Inflation Pushes Treasury Yields Back Above 5%

Wall Street closed modestly lower on Tuesday as hotter-than-expected US inflation data pushed the 10-year Treasury yield back above 5% and firmed bets on a December Federal Reserve rate hike. The FTSE 100 also slipped, dragged down by mining stocks as gold tumbled. Futures and Asian markets rebounded early Wednesday after CoreWeave's strong quarterly results eased some AI-bubble concerns.

Equities

The FTSE 100 fell on Tuesday, dragged lower by mining stocks as gold prices tumbled. The blue-chip index slipped 0.2%, while the FTSE 250 edged higher. European shares, including the FTSE 100, were indicated to open firmer on Wednesday as softer oil prices eased inflation worries.

Marks & Spencer was the index's top riser on Tuesday after forecasting profit growth over the medium term. Vodafone fell on Tuesday despite raising its annual profit and cash-flow guidance, with investors focused elsewhere.

Precious metals miners, including Fresnillo and Antofagasta, fell sharply as gold prices tumbled. Energy stocks also slipped as Brent crude dropped below $90 a barrel after the US played down further military action against Iran.

British Retail Consortium data showed UK consumer spending rose modestly in October, even as shoppers pulled back in some categories ahead of Black Friday. Bank of England policymakers signalled they were open to a further rate rise in December, with money markets now pricing roughly even odds of a hike.

Wall Street closed lower on Tuesday after hotter-than-expected inflation data raised the odds of a bigger Federal Reserve rate hike in December. The Dow fell 0.3%, the S&P 500 lost 0.4% and the Nasdaq Composite dropped 0.7%.

Nvidia fell again as its board examined whether chief executive Jensen Huang had been targeted by a foreign intelligence operation, extending its recent slide. CoreWeave jumped in after-hours trading after posting a sharp rise in quarterly revenue and bringing forward its profitability timeline, helping ease broader worries about AI-sector spending.

Elsewhere, Anthropic pressed ahead with plans for a stock market listing valued at up to $1.4 trillion, a closely watched test of investor appetite for the AI boom. SoftBank Group swung to a quarterly net loss after absorbing heavy costs tied to building out US data centres.

US futures and Asian markets rallied early Wednesday as CoreWeave's results lifted sentiment across the AI trade.

Forex & Commodities

The dollar index firmed on Wednesday, building on a 0.5% gain on Tuesday, as hotter-than-expected US inflation data cemented expectations of a Federal Reserve rate hike in December. The index was last little changed at around 102.3, near a two-week high.

Sterling was little changed against the dollar, holding close to $1.33, as investors weighed the prospect of a more hawkish Bank of England alongside persistent dollar strength. The euro was similarly flat against the dollar.

The yield on the 10-year US Treasury note crossed 5% on Tuesday for the first time in weeks, while two-year yields jumped to their highest level in over a year. The move came after data showed core US inflation running hotter than expected for a third straight month, firming bets on a bigger Fed rate increase next month.

Gold rebounded around 0.3% on Wednesday to near $4,045 an ounce, after tumbling almost 3% on Tuesday in its steepest one-day fall in months. The slide came as a stronger dollar and rising Treasury yields reduced the appeal of non-yielding bullion, with traders now pricing in a Fed rate hike next month with near certainty.

Oil prices rebounded on Wednesday after a two-day slide, with Brent crude rising around 1% to above $92 a barrel. Brent had fallen as low as $89 overnight on growing hopes that the Iran conflict could soon be resolved following the Democrats' midterm election victory.