Dollar jumps, stocks and bonds dented by hot US inflation data

By Amanda Cooper

LONDON, Oct 14 (Reuters) - The dollar ‌rallied, while US Treasury ​yields shot ​higher and stock futures fell on Wednesday, after data showed consumer inflation picked up more quickly than expected in the world's largest economy last month, firming up expectations for another rate rise as early as this month.

The Labor ‌Department said its core consumer price index rose 0.3% in September from August, versus economist expectations for ⁠a rise of 0.2%. On an annual basis, core CPI, which strips out food and energy prices, rose 2.6%, above forecasts for a rise of 2.5%, ‌while the headline rate rose 3.7%, above ‌estimates for a rise of 3.6%.

The dollar rose 0.3% against a basket of currencies, while US 2-year Treasury yields, which are most sensitive to shifts in expectations for inflation and monetary policy, leapt 7 basis points on the day to ​4.872%, from around 4.77% earlier on.

"While energy prices might be grabbing the headlines, today's report suggests the inflation problem runs much deeper. A stronger-than-expected core inflation reading adds to mounting evidence that domestic price pressures are becoming more entrenched, rather than ⁠easing," George Brown, senior economist at Schroders, said.

"Markets are right to assume that policy will need to become much more restrictive to return inflation to target. The question ​is whether the Fed is prepared to tighten as much as the inflation outlook demands."

Money markets showed traders upped their bets on the chances of the Federal Reserve delivering another rate rise this ​month to around 47%, from closer to 20% prior to the ‌data, while cementing the odds of an additional rise in December, according to LSEG data.

DOLLAR LEAPS

The dollar index, which tracks the US currency against six others, was up nearly 0.4%, from having been up just ⁠0.1% earlier on, not far from its highest since April 2025. The euro dropped 0.4% to $1.115, while the pound fell 0.25% to $1.322.

S&P 500 futures reversed course, falling 0.25% on the day, from having been up 0.1% earlier on, while those for the Nasdaq dropped 0.5%.

More of Wall Street's big banks ⁠reported earnings, with Bank of America, which saw profits fall in the third quarter, and also Morgan Stanley, which beat expectations for its third-quarter profit ​thanks to higher income from investment banking and strong equity trading.

US chip and AI-related shares fell in premarket trading on Wall Street, suggesting another drop after the opening bell, while over in Europe, several large tech stocks were among the strongest performers, led by Dutch chip equipment maker ASML, ‌whose shares rose 1.4% after upbeat results.

Europe's STOXX 600 pared some of the day's gains to last trade up 0.3%, while the MSCI All-World index fell into negative territory, down 0.1% on the ‌day.

Sentiment was already fragile prior to the consumer data, given the renewed strength in oil prices following attacks on two vessels in the Strait ⁠of Hormuz and after Iranian officials told Reuters they ‌were deploying new tactics to target ships, ​raising the risk of fresh disruption to energy supplies.

Brent crude futures, which are around their highest in nearly two weeks, were last up 0.2% at nearly $106 a barrel.

(Reporting by Amanda Cooper in London; Editing ‌by Alison Williams)

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