The figure came out on Wednesday, October 14, at 14:30 Paris time: the US consumer price index for September showed 3.7% year on year, compared with 3.4% in August and 3.6% expected. Core inflation, which excludes energy and food, came in at 2.6%, against 2.5% expected. According to Journal du Coin, fuel prices, driven up by the war with Iran, account for most of the acceleration; Brent closed at 106 dollars. In less than twenty-four hours, Wall Street had its worst session since July, the Seoul stock exchange tumbled by more than 7% once again, and bets on a Federal Reserve (Fed) rate hike on October 28 rose sharply.

Wall Street: tech pays for the rise in yields

The Nasdaq lost 1.9% (511.51 points) to 26,692.87 points and the S&P 500 fell 1.1% to 7,718.94 points, its fifth losing session out of six since its record. The Dow Jones limited its decline to 0.1%, at 51,621.48 points, supported by defensive sectors such as healthcare (+2.4%).

The technology sector fell 3%. According to the AP news agency’s market wrap, CoreWeave plunged 15.5%, Oracle 8.8%, GE Vernova 6.2%, AMD 5.7%, Nvidia 3.2% and Broadcom 3.1%.

Rates reacted first: the 10-year Treasury yield went from below 5.17% before the release to above 5.32% during the session, and the 30-year yield reached 5.59%. The link with artificial intelligence lies in financing: data centres are largely built on credit, and every rise in yields makes the bill more expensive. “Inflation is cooking with gas,” sums up Jamie Cox of Harris Financial Group.

Seoul: the Kospi tumbles once again

On Thursday, October 15, the Kospi opened at 5,673 points (-5.6%). At 9:08 Seoul time, programme selling was suspended for five minutes. The index hit 5,571 points around 10:15, 7.28% lower than the previous day. Samsung Electronics lost as much as 8.2% and SK Hynix as much as 10.8%. The rise of China’s CXMT in memory chips is also weighing on the two Korean groups.

To put this decline in perspective: it is the sixth consecutive losing session, after a first slump of 8% in July. Journal du Coin puts the index nearly 40% below its June record, while noting that it is still up about 32% since January 1.

Bitcoin followed suit: it was trading at around 80,800 dollars on Thursday morning according to CoinGecko, down 3.6% over 24 hours.

Fed: the facts and the bets

The facts first. The Fed raised rates in September, from 3.75% to 4%, its first hike since 2023. Its monetary policy committee (FOMC) meets on October 27 and 28. A 25-basis-point hike would take the range from 4% to 4.25%. The personal consumption expenditures (PCE) index, another inflation gauge watched by the Fed, is due on October 27.

Then the expectations, which vary depending on the tool and the time of the reading. According to CME FedWatch, the probability of a 25-basis-point hike rose from 21.6% to 32.7% after the inflation release; another reading from the same tool shows it rising from 22% to 35% in one day. On Wednesday evening, Allnews, citing AWP and AFP, reported that markets were mostly expecting, at around 60%, rates to be held. Journal du Coin, for its part, noted CME odds down to 52.9% for a hold, or 47.1% for a hike. Prediction markets lean more towards the status quo: around 62% on Polymarket and 61% on Kalshi, which still showed 80% before the release according to a tracking site. The gap is partly down to method: the CME reads interest rate futures, while Polymarket and Kalshi read binary contracts between bettors.

Interpretations also diverge. “The surprise was not concentrated in a single item, but was broad-based,” sums up Omair Sharif, founder of Inflation Insights, and Eugenio Aleman (Raymond James) believes that this broadening increases the probability of a hike on October 28. According to Reuters, cited by Journal du Coin, traders were nevertheless betting heavily against a second consecutive hike under Kevin Warsh’s chairmanship, a week before the November midterm elections. None of these probabilities is a decision: that will only be known on October 28.

Beige Book: energy spreads through the price chain

On the same day, the Fed published its “Beige Book”, its regular survey of economic conditions. Higher energy prices, particularly for diesel, are feeding through into costs across the entire supply chain. Businesses selling to consumers, however, are struggling to pass them on and are squeezing their margins, as “consumers continue to push back against price increases.” In some regions, persistent uncertainty over energy and tariffs is leading businesses to expect further price increases in the coming months.

The overall picture remains one of growth. Activity “grew modestly,” with most districts reporting slight or modest growth and four no change. Employment is broadly stable compared with the previous report, wages are rising moderately, but demands for larger increases to offset inflation are becoming more pressing.

Upcoming milestones

The sources consulted give no figures for the reaction of the SMI or the franc. European markets opened on Thursday against the backdrop of this double decline, in New York and then in Seoul. Upcoming dates: further US bank earnings this week, the PCE index on October 27, the Fed decision on October 28, then Nvidia’s results in November, presented by Journal du Coin as a test of artificial intelligence financing.

Sources

  • Journal du Coin: “US stock market: inflation and doubts about AI send the Nasdaq plunging”
  • Journal du Coin: “Kospi: new 7% crash in Seoul, bitcoin slides towards 80,000 dollars”
  • Journal du Coin: “Fed rates: prediction markets no longer rule out a hike on October 28”
  • Allnews: “Rising energy prices are feeding through the entire chain, the Fed says”