European indexes mostly gain after US CPI pushes 10-year yield above 5%

As trading in London and Europe draws to a close, most major indices on the continent are in positive territory, with Spain posting the strongest advance. The UK's FTSE 100 bucked the trend. In the US, the hotter-than-expected CPI report continues to drive bond and currency markets. The 10-year Treasury yield has climbed back above 5%, the dollar is strengthening against most currencies, and an early Nasdaq bounce on Anthropic IPO news has faded into renewed selling.

Spain leads European markets higher. The FTSE 100 trails behind.

Spain's IBEX 35 added 0.98%, followed by Italy's FTSE MIB with a 0.69% gain, France's CAC 40 up 0.55% and Germany's DAX rising 0.31%. The UK's FTSE 100 slipped 0.29%.

Hotter US CPI pushes the 10-year back above 5%

European benchmark yields all moved higher. France's 10-year led the increase, rising 8.5 basis points to 4.806%. Germany's yield climbed 7.5 basis points to 3.328%, Spain and Italy each added 7.4 basis points to 3.896% and 4.380% respectively, and the UK gained 6.8 basis points to 5.208%.

October headline CPI came in at 0.4% month-over-month against a 0.3% forecast, while core CPI rose 0.3% versus an expected 0.2%. Headline inflation moderated from September's 0.6% pace, but core matched the prior month's reading. On a three-month annualized basis, headline CPI was running at 5.7% and core at 3.7%. The upside surprises gave traders another reason to price in tighter Fed policy after Governor Christopher Waller raised the possibility of a 50-basis-point hike in December.

The US 2-year yield jumped 21.4 basis points to 4.761%, the 5-year rose 18.4 basis points to 4.843%, and the 10-year gained 15.5 basis points to 5.017%. The 30-year yield increased 11.9 basis points to 5.375%. For the remainder of the US session, 5% serves as the barometer for the 10-year. The next focus is whether yields can hold above that level.

Waller put 0.3% core CPI in focus before the release

Speaking in London ahead of the CPI release, Fed Governor Christopher Waller indicated he was leaning toward a 25-basis-point rate increase in December even if inflation eased in October. If core CPI came in at around 0.3% or higher, he said the Fed should consider a 50-basis-point move. His rationale was that the economy continued to grow solidly, the labor market remained stable, and inflation was broad enough that moving too slowly could jeopardize the Fed's credibility. Core CPI printed at 0.3%, right around the threshold he had flagged. That helps explain why the 2-year yield led the move higher, surging more than 21 basis points to 4.76% by the close in Europe.

Waller also made a point that ties into today's decline in crude oil. Oil can fall on hopes for de-escalation in the Middle East, but he said limited refining capacity could keep diesel prices elevated even as crude becomes cheaper. For the Fed, the question is how much of those higher energy costs are still feeding through to the prices of other goods and services.

Anthropic gives the Nasdaq a lift, but the gains fade

The Nasdaq indices erased their early losses and briefly turned positive after reports that Anthropic is targeting November 18 to price its IPO and November 19 for its trading debut. Reports indicated that orders already covered the available shares and that roughly 20% of the offering could go to retail investors.

By the European close, the Nasdaq Composite was back down 1.21% and the Nasdaq 100 was down 1.22%. The Dow fell 0.56%, the S&P 500 dropped 0.77%, and the Russell 2000 declined 1.18%.

The dollar extends its gains. Gold and silver slide.

EURUSD slipped 0.65% to 1.1150 and GBPUSD dropped 0.86% to 1.3325. Both pairs moved back below their 200-hour moving averages after the CPI release. Those averages now provide sellers with a nearby level to lean against. USDJPY gained 0.56% to 158.79, near its session high of 158.84. AUDUSD fell 1.08% to 0.6851, the largest decline among major currencies in the snapshot.

Gold dropped 2.8% near $4,023 and silver fell 3.9% near $51.32 as yields and the dollar moved higher. Bitcoin was down about 2.6% near $73,020.

Crude oil remains lower, but buyers return from below $84

WTI crude fell $0.31 to $86.54 after trading as low as $83.88. That puts it $2.66 off the low and within $0.39 of the session high at $86.93. Brent dropped $0.64 to $91.93 after dipping to $89.16.

On the Middle East front, President Trump played down the prospect of renewed major strikes against Iran after meeting with Qatar's prime minister on Monday. Secretary of State Marco Rubio reinforced that message on Tuesday, saying the administration saw less need for major combat operations while sanctions and the naval blockade remained in place. Iran's top security official said no negotiations with Washington were underway, and the Strait of Hormuz remained a sticking point. The softer US tone helped take some of the supply risk premium out of crude early, but both benchmarks had recovered much of their losses by the European close.