The implications for inflation were another headache for bonds, which were still smarting from Tuesday’s red-hot U.S. retail sales report.
JPMorgan responded by ramping up its forecast for U.S. third quarter GDP growth to an annualised 4.3%, implying nominal growth of more than 7%. No recession to be seen here.
Markets still see less than a 10% chance of the Fed hiking rates in November, but that rises to more than 40% by January and futures now imply just 56 basis points of policy easing for all of 2024.
Even the shorter end of the Treasury curve was unable to maintain its recent calm and two-year yields spiked to their highest in 16 years at 5.24%, breaking a major bulwark at 5.20%.
Bonds across Asia felt the aftershocks, forcing the Bank of Japan into an impromptu operation to buy JGBs and limit the rise in yields.
Equities, at least, are hoping for better news from Netflix later in the day as its efforts to restrict sharing of accounts could lead to a pick-up in subscriber growth. Tesla also reports and, while price cuts could hurt margins, the faithful just do not seem to care about such trivialities as profits.
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