U.S. October PPI data came in below expectations, slightly cooling expectations for Fed rate hikes.

U.S. October headline PPI data came in below expectations, slightly cooling market bets on Fed rate hikes. Data released by the U.S. Department of Labor on Friday showed that the U.S. October producer price index (PPI) rose 6.5% year-over-year, up from 6.3% previously and the highest level since November 2022, but below the market expectation of 6.6%; on a month-over-month basis, it rose 0.3%, below the market expectation of 0.4%, with the previous reading at 1.3%. Excluding food and energy, October core PPI rose 5% year-over-year, in line with market expectations, with the previous reading at 5%; on a month-over-month basis, it rose 0.3%, also in line with market expectations, with the previous reading revised to 0.8% from 0.70%. After U.S. October CPI data came in above expectations across the board on Tuesday, the market had basically fully priced in a 25-basis-point rate hike at the Fed's December 8-9 meeting, and bets on a 50-basis-point hike had also warmed somewhat. However, the October headline PPI data released on Friday came in below expectations while core PPI was in line with expectations, and did not further reinforce rate-hike bets. After the data was released, the rate-sensitive 2-year U.S. Treasury yield was last down 2.64 basis points at 4.853%. U.S. stock index futures extended gains. Spot gold rose about $20 in intraday trading and was last at $3,894.43/oz. Although the latest PPI data did not reinforce market bets on Fed rate hikes, recent relatively hawkish remarks by Fed officials have "added fuel to the fire" of rising rate-hike expectations beyond the economic data. The market's next focus will shift to the October PCE price index due to be released on November 25 U.S. Eastern Time. That data is the inflation gauge the Fed prefers. Against the backdrop of recently rekindled U.S. inflation pressures, the October PCE, especially core PCE, will become an important reference for judging the direction of the Fed's monetary policy in December.