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Inflation Back in Focus for Markets

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It was a wavering moment for stocks as they swung from gains to losses and back to gains in a crowded news environment. Investors were digesting the latest Producer Price Index (PPI) and the FOMC minutes. Likewise, we have a new IPO launched, Birkenstocks, which did not fare well on its first day of trading.

Let’s get into the details.

Birkenstocks lack lusture IPO

The German footwear company had priced its IPO at $46 per share and began trading, which gives it a valuation of around $8.6 billion. Nonetheless, it opened at a trading price of $41, well below its offering price.

If one sees such a lofty valuation as a success, it could be true, as the overall valuation is still somewhat larger than most peers such as Skechers, Allbirds and Crocs.

The poor performance of IPO is reflective of a generally monetary restrictive environment as investors pour money into Treasuries and pare down positions in equities. A look at Arm Holdings showed a story of a spectacular debut but is now trading below its opening price. The same story played out for Instacart’s holding company, Maplebear, which went public on 19 September.

FOMC Minutes provide more certainty and calm

It was essentially a report that did not contain any ugly surprises. Fed officials saw current policy measures as restrictive and that most would support moving away from the rate hikes policy towards duration end of the policy in keeping the current Fed Funds rate higher for longer.

Next Stop: The CPI data

Indeed, with a 4-day gain in stocks in progress, investors will be closely eyeing the CPI data release at 8.30 pm Singapore time. It will be the next hurdle for the market to get clues on the general price level in the economy and a possible hint on the Fed’s next policy move in November FOMC, given the Federal Reserve’s largely data-dependent policy direction in recent years.

It is 12 October, Thursday, 8.50 am in Singapore and 8.50 pm in New York. We had a pretty firm October and let’s hope for a good CPI print to carry us towards a sea of calm.