Macro Bites – September CPI Surprise Raises Fed Rate Hike Risks

September CPI came in hotter than expected across almost all major metrics, sparking immediate reactions in financial markets.  Both headline and core annual inflation accelerated compared to the previous month, complicating the Fed’s disinflation narrative and raising the probability of further monetary tightening.  CPI +0.6% m/m (vs. +0.6% est.) and +3.7% y/y (vs. +3.6% est.).  Core CPI +0.3% m/m (vs. +0.2% est.) and +2.6% y/y (vs. +2.5% est.).

Fitch warned that rising bond yields are making it much harder for major developed economies to stabilize debt burdens, with countries such as France, the United States and Britain facing growing fiscal challenges. Benchmark 10-year government bond yields in the world's 10 largest developed economies had risen by an average of 81 basis points so far this year. That would contribute to a nearly $4 trillion increase in overall developed-market government debt, taking it above $75 trillion, or $68.5 trillion across the top 10 economies.

China’s General Administration of Customs reported on Wednesday that headline exports jumped 36.3% y/y in Sept., drastically outperforming market forecasts of +25.5%, and the fastest monthly expansion since Feb.  When combined with y/y imports growth of 31.0% (accelerating from +28.2% in Aug.) China’s trade surplus hit a historic monthly high of $133.5B and now stands at ytd total of $938B (Jan.-Sept.).  The global boom in AI infrastructure and EV’s remains the primary driver of this growth, even as it deepens trade friction with Western partners.

The supervisors' union at BHP's ​Escondida copper mine in Chile and ‌company representatives have reached a preliminary agreement to avoid a strike, two sources ​familiar with the negotiations told ​Reuters on Wednesday.  The agreement, which has ⁠already been drafted, still needs ​to be ratified by members of the ​union in the coming hours.  Talks ​between BHP and the union started hours earlier in ‌a last-ditch ⁠effort to avoid a work stoppage at the world's largest copper mine.  The possibility of a strike at Escondida has been supporting copper ⁠prices ​as any stoppage would ​tighten global copper supplies.