Rising commodity prices raise fears of increasing global inflation

The US stock market closed with another decline yesterday. Dow Jones index decreased by 0.94%, S&P 500 index fell by 1.3%, Nasdaq Composite lost 2.14%. The 10-year US Treasury bond yield reached 1.56% last week, the highest level since June, as investors worried about inflationary pressures and tighter monetary policy. Former US President Donald Trump claims, "inflation is going to ravage our country." All of it strengthens the correction in the technology sector as capital flows into the real economy.

Current US President Joe Biden says that a possible US default will threaten the dollar's status as the world's reserve currency, and raising the national debt ceiling has nothing to do with the infrastructure bill and is about paying past debts, not cutting new spendings. "A failure to raise the debt limit will call into question Congress’s willingness to meet our obligations that we’ve already incurred," Joe Biden said.

Yesterday, there was a large-scale failure in the services of many Internet companies. The biggest problems were observed in the work of Facebook, Instagram, and WhatsApp. A few hours after the outage began, the "facebook.com" domain, as well as the data of more than 1.5 billion Facebook users, were for sale. The Facebook stock decreased by 4.9% yesterday, the biggest drop since November 2020. There are also reports of outages at Google, Youtube, Netflix, Twitter, and Zoom.

S&P 500 companies increased earnings by 96.3% in the second quarter, the strongest increase since the fourth quarter of 2009. But third-quarter growth is expected to be much more modest, with an estimate of 29.4% year-over-year. JPMorgan and other major banks are set to begin their quarterly reporting season in two weeks.

Pfizer and Biontech received a positive CHMP (Committee for Medicinal Products for Human Use) approval for COVID-19 booster vaccines in the European Union.

European stock indices closed yesterday's trading with a decline. By the close of trading the composite index Stoxx Europe 600 decreased by 0.47%, German DAX lost 0.79%, British FTSE 100 lost 0.23%, French CAC 40 decreased by 0.61%, Spanish IBEX 35 and Italian FTSE MIB lost 0.09% and 0.6%, respectively. Energy crisis, slowdown of the economic growth, and problems in the global supply chain put pressure upon the quotes.

Oil in the US hit a 7-year high after OPEC+ refused to accelerate production, despite the fact that the switch from gas to oil boosted global oil demand. OPEC+ officials believe the market is balanced. However, there is evidence that OPEC+ countries have agreed to increase production by 400,000 bpd in November.

Asian stocks also declined as rising commodity prices heightened fears of rising global inflation. The broadest index of Asia-Pacific stocks outside Japan, MSCI, fell by 1.3%, declining for the third session in a row. Japanese stocks decreased by 2.8%, South Korean stocks lost 2.5%, and Australian stocks decreased by 1%.

China's Communist Party continues to tighten its control on the country's Internet giants and is using its wealth to pay for its ambitions to reduce its dependence on the US and European technology. The party says that anti-trust legislation will be a priority until 2025, and the competition will help create jobs and raise living standards.

China has sent 56 military aircraft to Taiwan's air defense zone. In turn, Taiwan calls on China to stop its irresponsible and provocative actions.

Main market quotes:

S&P 500 (F) 4,300.46 −56.58 (−1.30%)

Dow Jones 34,002.92 −323.54 (−0.94%)

DAX 15,036.55 −119.89 (−0.79%)

FTSE 100 7,011.01 −16.06 (−0.23%)

USD Index 93.80 −0.24 (−0.26%)

Important events for today:
  • – Japan Tokyo Core Consumer Price Index at 02:30 (GMT+3);
  • – Australia Retail Sales (m/m) at 03:30 (GMT+3);
  • – Australia RBA Interest Rate Decision at 06:30 (GMT+3);
  • – Australia RBA Rate Statement at 06:30 (GMT+3);
  • – Japan BoJ Gov Haruhiko Kuroda’s Speech (TBA);
  • – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
  • – UK Services PMI (m/m) at 11:30 (GMT+3);
  • – US ISM Services PMI (m/m) at 17:00 (GMT+3);
  • – Eurozone ECB President Lagarde’s Speech at 18:00 (GMT+3).

by Justforex, 2021.10.05

We advise you to get acquainted with the daily forecasts for the major currency pairs.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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