Market concerns over a more aggressive tightening by the Federal Reserve could push global stocks lower

Investor sentiment turned sour on Wednesday following a decline in Wall Street indexes overnight. US stocks fell following a solid winning streak that pushed the benchmarks to fresh record highs earlier this week and month.  Market participants are getting more cautious ahead of US inflation data.

Yesterday, the report showed that the US PPI rose in line with expectations, fueling worries about the broadening inflation pressure. The producer price index remained at the highest level since November 2010 while the core reading remained at the highest reading ever. 

Furthermore, China’s CPI rose 1.5% in October year-on-year, expanding from a 0.7% increase in September, while the producer price index went up 13.5% year on year last month. As such, fresh data added to inflation concerns ahead of the key report out of the United States.

Should the US CPI confirm further acceleration in the inflation rate, market concerns over a more aggressive tightening by the Federal Reserve would push global stocks lower across the board while US indexes would continue to retreat from all-time tops seen earlier in the week. 

In this scenario, dollar demand will reemerge while gold prices may see a solid retreat from two-month highs seen above the $1,830 area. EURUSD is under pressure already following another failed attempt to challenge the 20-DMA. After three days of gains, the pair slipped from the 1.1600 figure but was holding above the 1.1550 intermediate support during the European hours on Wednesday.

In other markets, rallied to fresh record highs around $68,500 on Tuesday and has been now reversing yesterday’s gains since the start of the day. The coin slipped to $66,300, staying bullish despite the local correction amid overbought conditions. It looks like the largest digital currency by market capitalization could see another rally towards fresh tops after a local correction.


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