Inflation is above the target level in many countries

The US stock market closed in the green zone yesterday. At the close of the stock market, the Dow Jones index added 0.92%, the S&P 500 index increased by 1.05%, and the NASDAQ index jumped by 1.25%. But investors still have plenty to worry about, from supply chain disruptions to skyrocketing prices and anticipation of tighter monetary policy from the Federal Reserve. Investors are no longer willing to buy back every stock market drop, and high oil prices create additional inflationary concerns.

Jim Cramer, a well-known US TV host and former hedge fund manager, says that he thinks investors may start looking for hard-hit stocks to buy. Goldman Sachs expects a strong 4th quarter with the S&P 500 up 9%.

US President Joe Biden warns of the risk of a US government debt default due to Republican opposition. The US again opposed the Nord Stream 2 pipeline after Russia announced that it had begun to fill it with gas.

European stock indices rose yesterday. German DAX gained 1.05%, British FTSE 100 added 0.94%, French CAC 40 increased by 1.52%, Spanish IBEX 35 and Italian FTSE MIB increased by 1.54% and 1.95%, respectively. Despite the fact that the cost of gas futures in Europe has updated the record, exceeding $1300 per thousand cubic meters, ECB head Christine Lagarde said that the Central Bank should not overreact to problems in energy supply chains and rising energy prices, as monetary policy can not directly affect it. The ECB still believes that the region's economy will return to pre-pandemic levels by the end of the year.

Saxo Bank's chief equity market strategist said the following, "Policies are being implemented globally as if we have a demand shock, but we are currently facing a supply-side shock due to the pandemic, lack of investments in the physical world, and an accelerated decarbonization through electrification and renewable energy."

Current technology does not allow for increased solar and wind generation because of the instability of such sources. It will lead to supply lagging behind demand and rising inflation, weak real economic growth, and negative rates.

Oil is holding near its highest level since 2014 following OPEC+'s decision to maintain a gradual increase in supply, even as the natural gas crisis boosts demand for crude oil. Companies like Glencore, Gunvor, Trafigura, and Vitol faced margin calls in the gas futures market and had to raise additional funding from banks. Brokers are demanding hundreds of millions of dollars from commodity traders to secure positions that were taken as part of hedging strategies.

Gold prices have stabilized in recent days. But as long as US government bond yields continue to rise because of rising inflation fears, gold and silver prices will be under selling pressure.

The missed payment on the bonds of Chinese real estate developer Evergrande has investors worried again. Another major Chinese developer Fantasia Holdings Group failed to pay its bond debt on time. The company missed the deadline to pay its $205.65 million bond debt due Monday.

Beijing is creating a system designed to ensure that the automated processes of Internet platforms are fair, transparent, and consistent with the ideology of the Communist Party. China's tech index seeks a new low as the global sell-off continues. The Hang Seng Tech Index decreased by 2.5% yesterday. The blue-chip CSI 300 Index lost another 3%, extending losses from the September high to 10%.

Australia's banking regulator is tightening home loan requirements as the rapid credit growth that has caused a jump in home prices poses a risk to financial stability.

New Zealand's central bank raised interest rates for the first time in seven years in an attempt to curb rising inflation. The Reserve Bank of New Zealand (RBNZ) raised the interest rate from 0.25% to 0.5%. The RBNZ also plans to remove most of its stimulus measures as the economy recovers.

Main market quotes:

S&P 500 (F) 4,345.72 +45.26 (+1.05%)

Dow Jones 34,314.67 +311.75 (+0.92%)

DAX 15,194.49 +157.94 (+1.05%)

FTSE 100 7,077.10 +66.09 (+0.94%)

USD Index 94.00 +0.22 (+0.24%)

Important events for today:
  • – New Zealand RBNZ Interest Rate Decision at 04:00 (GMT+3);
  • – New Zealand RBA Rate Statement at 04:00 (GMT+3);
  • – UK Construction PMI (m/m) at 11:30 (GMT+3);
  • – Eurozone Retail Sales (m/m) at 12:00 (GMT+3);
  • – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+3).

by Justforex, 2021.10.06

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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