Global inflation accelerates

Shady Elborno - Head of Macro Strategy
Published Date: 18 November 2021


  • UK inflation hit a 10-year high as consumer prices rose by 4.2% y/y in October, leaping from a 3.1% y/y increase in September, largely driven by rocketing household energy bills. The data by the Office for National Statistic showed gas prices paid by consumers rising 28.1% y/y in October. British energy suppliers are grappling with soaring wholesale gas prices that have led to the collapse of a number of UK energy companies. Other data showed that prices charged by factories rose by more than expected, up 8% y/y the sharpest increase since 2011. Manufacturers' input costs jumped by 13% y/y, the most since 2008, signaling further inflation pressure in the pipeline.
  • Canada's annual inflation rate accelerated to 4.7% y/y in October, matching a February 2003 high, led by sharp rises in gasoline and housing prices. Inflation was up from 4.4% y/y in September, marking the seventh consecutive month in which headline inflation topped the Bank of Canada's 1-3% control range. Prices went up in all eight major component groups for the second month in a row.  CPI common, which the central bank favors as best gauge of the economy's underperformance, was unchanged at 1.8% y/y. The Bank of Canada signaled last month that it could hike its overnight interest rate as early as April 2022, while warning inflation was likely to rise further this year and stay above target through most 2022.
  • Euro zone inflation rose 0.8% m/m in October, and 4.1% y/y, in line with an earlier Eurostat estimate to more than twice the European Central Bank's target.  Without the volatile energy and unprocessed food prices, a measure the ECB’s core inflation, rose 0.3% m/m and 2.1% y/y. Breaking down the y/y total, energy added 2.21 %, services added 0.86 %s, food alcohol and tobacco added 0.43 % and non-energy industrial goods 0.55 %, according to Eurostat.
  • US single-family housing starts, which account for the largest share of the housing market, dropped 3.9% m/m to a seasonally adjusted annual rate of 1.039mn units last month. The fourth-straight monthly decline pushed starts to the lowest level since August 2020. Homebuilding fell in all four regions, with large decreases in the Northeast, Midwest and West. The drop underscored the disruption to the housing market from an ongoing shortage of materials and labor. The densely populated South, where the bulk of homebuilding occurs, reported a 1.8% m/m drop in single-family starts. The backlog of single-family houses authorized for construction but not yet started jumped 4.8% m/m to a rate of 152,000 last month, the highest since August 2006. Permits for future homebuilding was up 4.0% m/m to a rate of 1.650mn units in October. Single-family permits rose 2.7% m/m to a rate of 1.069mn. The stock of single-family housing under construction increased 1.4% m/m to a rate of 726,000 units last month, the highest since May 2007. Homebuilding remains underpinned by a severe shortage of previously owned homes on the market, which has resulted in double-digit house price growth

Today’s economic data and events

  • South Africa central bank decision. Forecast: 3.75%
  • 17:00 Turkey central bank decision. Forecast: 15.00%
  • 17:30 US Initial Jobless Claims Forecast 260K                                                      
  • 17:30 US Philadelphia Fed Manufacturing Index (Nov) Forecast 24.0         

Fixed Income

  • US Treasury markets rallied despite few fundamental catalysts to push the market one way or the other. An auction of 20yr notes had moderate success but that failed to dent the downward move in yields over much of the day. Yields on 2yr USTs closed at 0.4979%, down 2bps, while the 10yr UST yield fell more than 4bps to 1.5889%.
  • Benchmark bonds moved higher in European markets as well with gilt yields slipping despite the stronger than expected UK CPI print for October. Bund yields held relatively unchanged although with a modest downward tilt.
  • In emerging markets, Turkish bonds fell ahead of the central bank meeting later today as expectations grow for another rate cut despite high levels of inflation in the economy.


  • Currency markets showed little substantial movement on the close with the DXY index falling less than 0.1% and EURUSD settling unchanged. USDJPY fell by 0.6% in one of the outsized moves for the day, closing at 114.08. GBPUSD rallied strongly though on the back of the high inflation print for October firming up rate hike expectations.
  • In the commodity currency space, USDCAD rose by 0.4% to 1.2610 while AUD fell almost 0.5% to 0.7267 amid broader weakness in raw material prices.


  • The inflation print in the UK weighed on the FTSE 100 yesterday as it dropped -0.5% on the day. The stronger pound (driven by greater rate hike expectations) dragged down multinationals on the index. On the continent, however, equity indices continued to hit new record highs, albeit on minor moves. The DAX closed almost flat, up 0.02%, while the CAC added 0.1%.
  • In the US, all three major indices closed lower. The Dow Jones lost -0.6%, while the NASDAQ and the S&P 500 both dropped -0.3%.
  • The DFM continued to give back some of its recent gains yesterday, falling a further -0.8% - but the index remains up 16.4% m/m. The ADX also dropped, by -0.2%, while the Tadawul added 0.1%.


  • Oil prices slumped sharply, by recent standards, falling 2.6% in Brent futures to USD 80.28/b and by almost 3% to USD 78.36/b in WTI. Oil markets continue to price in the potential of a release of strategic reserves with the topic apparently under discussion when the US and Chinese leadership met earlier in the week.
  • EIA data showed a sizeable drop in US crude inventories last week, falling by 2.1m bbl along with drops in gasoline and distillate stocks. Production fell by 100k b/d to 11.4m b/d while product supplied jumped sharply by 2.3m b/d to nearly 22m b/d.

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