US equities decline amid global inflationary headwinds as yields and the Dollar jump.

US stocks broke a two-day winning streak with the major indexes finishing moderately lower as global inflation fears lingered after both Canada and the UK CPI figures came in hot, showing signs that the inflation peak may not yet be in.

With risk aversion back (for the day at least) Bonds were sold off (Price down, yields up) with the US 10 year yield soaring back above 4.00%, it’s highest since June 2008. Higher US rates also saw the USD surging, with the Dollar Index topping 113

CHF and JPY were the underperformers as rising US rates, increasing already large rate differentials with these two low yielding currencies. The USDJPY is within touching distance of the psychological 150 mark as traders continue to test the Bank of Japan, almost daring them to repeat their September and likely earlier in October interventions.

One market bucking the risk off narrative was oil with US crude bouncing off support and rallying over 2% after an unexpected draw in crude stocks, despite an announcement from the White House that 15 million barrels would be sold from the SPR.

In today’s economic announcements the Employment report out of Australia will be closely watched for clues as to the RBA’s next move after their “dovish” hike at the last meeting. With rate markets fully pricing in a 25bp hike at their November meeting, a strong report could see odds jump for a return to a 50bp hike and see FX and equity markets re-price accordingly.