CPI catches the eye, crypto crumbles

Nov 10 (Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.

All eyes are on the latest US inflation numbers, but all tongues are wagging about the crash in crypto.

The October snapshot of US consumer prices comes at a slightly more nervous time for markets than a few days ago. Not only has the FTX collapse sparked unrest across the crypto universe, Meta Inc.’s ( META.O ) layoff of 13% of its workforce has brought the technological and economic outlook back into sharp focus.

The US interest rate market has been comfortable pricing in an implicit terminal rate above 5%, to be reached sometime in the middle of next year, for over a week. Sticky inflation could push those expectations even higher, but how much more will the Fed really tighten without breaking the economy?

Economists expect monthly and annual core readings to fall from September, and for the annual headline rate to fall to 8.0% from 8.2%. It will be the lowest since February.

As terminal yield forecasts have plateaued since the turn of the month, Treasury yields have been fairly contained and the dollar has fallen back from its recent 20-year peak. Perhaps macro traders are laying the groundwork for a move.

Meanwhile, there has been a lot of movement in other markets. Bitcoin fell 10% on Tuesday and 12% on Wednesday to a two-year low below $16,500. Thursday marks a year since its peak of $69,000. Not a particularly happy anniversary.

Can cratering crypto spill over into technology? The web of holdings and investments between crypto and technology is murky but real.

Tesla shares sank to a two-year low on Wednesday, and Cathie Wood’s ARKK Innovation ETF fell to a five-year low — down 80% from last year’s peak. Meta shares may have rallied as investors cheered the 11,000 job cuts, but redundancies on that scale are a clear health warning for the sector.

The markets can get steamy. For the first time in a month, the VIX ‘fear index’ rose two days in a row.

Three key developments that could give more direction to the markets on Thursday:

Inflation in the US (October)

Feds Waller, Harker, Logan, Daly, George and Williams speak

Germany current account (September)

Reporting by Jamie McGeever in Orlando, Fla.; Editing by Josie Kao

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