Headline Update, US Inflation, and Microsoft Get Purchase Approval

Yesterday afternoon, markets turned their attention to the latest release of US inflation figures. Headline CPI came in marginally higher-than-expected, with the month-on-month print for September coming in at 0.4% against expectations of 0.3%. The headline, year-on-year print for September also came in 10bps above expectation at 3.7%, signalling that the Fed still have their work cut out ahead of them and that another rate hike may be on the cards.

Meanwhile, core inflation – which excludes the more volatile food and energy indexes – came in line with expectations, with the annualised figure for September slowing to 4.1%, its lowest level since September. This also represented a slowdown of 20bps from last month’s print, as inflation around transportation, new vehicles and clothing eased. Nevertheless, as the America’s housing market continues to adjust to tighter monetary conditions, the Shelter Index hit 7.2%, which while representing a 10bps slowdown from last month remains elevated. As the Bureau of Labor Statistics notes “The index for shelter was the largest contributor to the monthly all items increase, accounting for over half of the increase”.

The hotter-than-expected inflation print saw a rally to the dollar as markets upwardly revised rate expectations from the Fed. As such, the DXY rallied 0.8% over the course of yesterday’s session, hitting 106.6, marking its highest level in a week.

All eyes now turn to the Fed’s rate decision on 1 November in addition to Chair Powell who is speaking at Economic Club of New York on 19 October.  As we looked at yesterday, the release of the Fed Minutes noted that all members of the FOMC agreed that monetary conditions ought to be restrictive enough for some time to ensure that inflation gets down to their 2% target level. As usual, the minutes indicated that policy maker’s views would be data dependent, and the document indicated that “a vast majority of participants continued to judge the future path of the economy as highly uncertain”.

The Competition Markets Authority have given the go ahead for Microsoft’s to buy video games giant, Activision Blizzard. This marks the largest deal to date in the gaming world and comes after the CMA previously blocked Microsoft’s bid in April 2022, citing concerns around the impact that it would have on competition in the cloud gaming market. Since then, changes to the deal have been made and the French game giant Ubisoft, agreed to acquire Activision Blizzard’s cloud gaming rights, rather than Microsoft. Regulators in Europe and the US had previously given the green light, so the UK regulator marked the final hurdle for Microsoft (who owns Xbox) to acquire the company which produce games such as Call of Duty and Tony Hawk Pro Skater.

Despite the CMA giving the go-ahead, they have expressed discomfort at they way Microsoft have engaged with them. Here, the CMA’s chief executive, Sarah Cardell, maintained that “Tactics employed by Microsoft are no way to engage with the CMA”. They continued by stating that “with the sale of Activision’s cloud streaming rights to Ubisoft, we’ve made sure Microsoft can’t have a stranglehold over this important and rapidly developing market”.

Today will see central bankers, finance ministers, executives and academics from around the world meet for day 5 of the IMF’s meeting in Marrakesh. As we looked at yesterday, the summit made headlines with the release of the IMF’s World Economic Outlook report, published on Tuesday which downwardly revised global growth forecasts. The report also projected that UK growth would be the weakest amongst G7 over 2024. Today’s highlights will include Christine Lagarde who will speak at 1400, where markets will be looking for some insight into her views on the ECB’s next moves as economies around the Eurozone adjust to tighter monetary conditions.