Oct 20, 2022
VOT Research Desk
Market Insights and Analytics
After three major US benchmark indices ended a two-day rally as the U.S. Dollar and Treasury yields resumed their upward moves, December S&P 500 futures (ESZ22) are trending down -0.43% this morning. Losses in the Financials, Healthcare, and Utilities sectors made up the majority of the weighting in three major stock indexes in the United States.
After U.S. homebuilding fell more than expected in September, the yield on the 10-year Treasury note reached its highest level in over 14 years. Expectations that the Federal Reserve would continue to be aggressive in raising interest rates to control stubbornly high inflation were unaffected by the soft housing data.”Job market demand remains robust and underlying inflation pressures probably have not peaked yet,” said Federal Reserve Bank of Minneapolis President Neel Kashkari on Wednesday
In a note, Morgan Stanley stated, “Against persistent core inflation pressures, the Fed is on track to continue tightening at a faster pace than originally anticipated.” It anticipated that the Fed would raise rates by 25 basis points in January, 50 basis points in December, and 75 basis points in November.
– 00:07 02:38 At the same time, U.S. rate futures have priced in a 92.7% chance of a 75-basis-point rate increase and a 7.3% chance of a huge 100-basis-point increase at the monetary policy meeting in November.
Positively, S&P 500 company profit growth expectations for the third quarter increased to 3% from 2.8% on Tuesday, but they are still lower than 11.1% at the beginning of July.
In a few hours, all eyes will be on the U.S. Initial Jobless Claims data. Investors will keep a close eye on the U.S. Philadelphia Fed Manufacturing Index, which was at -9.9 in September, as economists expect Initial Jobless Claims to come in at 230K, down from 228K the previous week.The October figure is expected to be -5.0, according to economists.
Additionally, data on U.S. Existing Home Sales will be available today. In comparison to the previous value of 4.80 million, economists anticipate this figure to be 4.70 million in September. The 10-year interest rate for the United States is currently at 4.174%, an increase of +1.08%.
As investors digested quarterly earnings reports amid ongoing political and economic uncertainty, the Euro Stoxx 50 futures fell -0.61% this morning. After Home Secretary Suella Braverman abruptly resigned on Wednesday, political uncertainty in the United Kingdom continues, further eroding Prime Minister Liz Truss’s authority. The more than 5% drop in Nokia (NOKIA.H.DX) after the Finnish telecom equipment manufacturer’s quarterly operating profit missed analysts’ estimates is another factor that hurts European stocks.
Today, data on the Eurozone Current Account, the Germany Producer Price Index (PPI), and the France Business Survey were made available.
In contrast to expectations of +1.3% m/m and 44.7% y/y, the German September PPI came in at +2.3% m/m and +45.8% y/y. The data demonstrated that inflation remained a serious issue in the largest economy of the Eurozone, likely putting pressure on the European Central Bank to maintain its policy of monetary tightening
The October Business Survey in France has been reported at 103, higher than anticipated at 101.
Asian stock markets ended today in the red as risk appetite waned due to concerns about a rate hike. The Eurozone Current Account declined to -26.3 billion euros in August, below expectations of -20.3 billion euros. The Shanghai Composite Index (SHCOMP) in China and the Nikkei 225 Stock Index (NIK) in Japan both closed lower by -0.92%.
Today, the Shanghai Composite closed lower, but declines were limited by expectations of additional Chinese stimulus measures. Expectations of additional monetary stimulus to support the economy were bolstered on Thursday when the People’s Bank of China maintained its loan prime rate at 3.65%.However, sentiment was impacted by concerns regarding the nation’s stringent zero-COVID policy and the delay of crucial economic data.
At the same time, high commodity prices and a weak yen are expected to increase economic pressure in the near future, which is why Japan’s Nikkei 225 Stock Index closed lower today. The implied volatility of Nikkei 225 options is taken into account by the Nikkei Volatility, which ended the day at 22.79, down 2.57%.
The September trade balance in Japan was reported at -2,094.0 billion yen, exceeding expectations of -2,167.4 billion yen.
