A strong season of reports pushes major stock indices to new highs

The US stock indices closed Monday at record highs. The S&P 500 increased by 0.18%, the Dow Jones added 0.26%, and the NASDAQ technology index jumped by 0.63%. All three indices set new price highs. Investors' focus is on reporting season and the US Federal Reserve meeting results that will be announced on Wednesday. The sharp growth of the euro quotes yesterday caused some skepticism among analysts about whether the Fed will announce the beginning of the QE program cut tomorrow. If Jerome Powell states tomorrow that the cutting stimulus will start not in November but in December, the dollar index may sharply fall.

The US Manufacturing PMI was 60.8 (above the forecast of 60.4) but below the previous month's value of 61.1. On the one hand, there is a slowdown in activity in the manufacturing sector of the economy. On the other hand, the PMI index is steadily holding above its average value over the last year, indicating sustainability.

A declassified US intelligence report stating that it is likely that the COVID-19 pandemic originated in a Chinese laboratory is unscientific and does not deserve confidence, said Chinese Foreign Ministry spokesman Wang Wenbin. In response, Wang noted that "a lie repeated a thousand times is still a lie," adding that US intelligence agencies have a reputation as fraudsters and deceivers. "Tracking the origin of the new Covid is a serious and complex issue that should and can only be investigated in cooperation with the world's scientists," Wang added.

According to Goldman Sachs, President Joe Biden's tax plans now represent a smaller threat to the entire stock market. The Biden administration is proposing a 1% tax on corporate stock buybacks, as well as minimum fees on corporate and wealthy individuals to pay for its $1.75 trillion social and climate spending plan. Goldman Sachs believes a 1% surcharge on stock buybacks would not undermine the bull market, as it could encourage other uses of cash, including mergers and acquisitions. Also, according to analysts at Goldman Sachs, the US Federal Reserve is expected to begin raising interest rates in July 2022 (the previous forecast was Q3 2023).

US President Joe Biden said yesterday that high energy prices show the need to diversify energy sources. The US will meet its ambitious goal of reducing emissions by 50-52% by 2030 from 2005 levels.

Moderna shares fell by 6.3% after the FDA postponed a decision on the Covid-19 vaccine for teens. American Airlines has already canceled more than 2,000 flights due to staffing shortages. Barclays Bank downgraded Tripadvisor twice as the recovery of the travel industry slowed down.

European stock indices closed yesterday in the green zone. The British FTSE 100 added 0.71% yesterday, the German DAX increased by 0.75%, the French CAC 40 added 0.92%. Italian FTSE MIB and Spanish IBEX 35 gained 1.23% and 1.38%, respectively. The growth was triggered by the strong reports of the European companies and a high correlation with the US indices.

According to the preliminary information, the OPEC+ countries intend to increase oil production by 400 barrels a day every month to ensure sufficient supply to the markets. Bank of America, on the other hand, still expects Brent oil to be $120/bbl by the middle of next year.

The price of gas in Europe fell below $740 per 1,000 cubic meters.

The Hang Seng tech index, which tracks the country's biggest tech companies, has failed to break out of the downtrend it has been in since July. According to Bloomberg, the volume of bearish options taking profits from further losses in the index still far exceeds the volume of bullish options. Nevertheless, despite the pressure on earnings, some investors and strategists expect that the peak of the repression is over.

Economists say China is showing signs of stagflation as prices continue to rise, while recent manufacturing data show a slowdown in production. In October, China's manufacturing activity fell more sharply than expected, contracting for the second month in a row. In turn, China will accelerate the growth of green renewable energy by planning large-scale wind farms and solar power projects.

Main market quotes:

S&P 500 (F) 4,613.67 +8.29 (+0.18%)

Dow Jones 35,913.84 +94.28 (+0.26%)

DAX 15,806.29 +117.52 (+0.75%)

FTSE 100 7,288.62 +51.05 (+0.71%)

USD Index 93.89 -0.24 (-0.25%)

Important events for today:
  • – Japan Monetary Policy Statement at 01:50 (GMT+2);
  • – Australia RBA Interest Rate Decision at 05:30 (GMT+2);
  • – Australia RBA Rate Statement at 05:30 (GMT+2);
  • – German Manufacturing PMI (m/m) at 10:55 (GMT+2);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
  • – New Zealand RBNZ Financial Stability Report at 22:00 (GMT+2);
  • – New Zealand Unemployment Rate (q/q) at 23:45 (GMT+2).

by Justforex, 2021.11.02

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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