VOT Research Report
Market Analytics and Considerations
This morning, the December S&P 500 futures (ESZ22) are trending up +0.22% after three significant US benchmark indices ended the scheduled meeting in the red due to Republican gains in the midterm elections appearing to be less significant than some had anticipated. Market participants are also concentrating on recent consumer price data that will give them insight into the trajectory of future interest rate increases. Drops in the Oil & Gas, Consumer Services, and Consumer Goods sectors were the main causes of the decline in three major U.S. stock indices.
The midterm elections did not result in a resounding triumph for the Republicans, as a stronger-than-expected performance by Democrats lessened the likelihood of a so-called red wave.
A red wave was actually more anticipated in the market. I believe we were in a rare circumstance where the market would have fared better the more the Republicans had won. At least certain stocks, such as those in the oil and defense sectors, would have had a substantial increase.
Today, everyone’s attention is on the latest consumer price index (CPI) data that will be released in a few hours by the Labor Department. In comparison to the previous reading of +0.4% m/m and +8.2% y/y, economists expect the October CPI to be +0.6% m/m and +8.0% y/y.
In terms of the inflation environment, CPI is one of the more crucial factors. It would be difficult to locate many investors who want to place a large wager before the report
In the meantime, December’s monetary policy meeting is expected to result in a 50 basis point rate increase with a 56.8% likelihood and a 75 basis point increase with a 43.2% chance, according to U.S. rate futures.
Investors will probably pay close attention to the U.S. Initial Jobless Claims figures, which were 217K last week. On average, economists expect the revised number to be 220K.
Data for the U.S. Core CPI will also be released today. Compared to September’s values of +0.6% m/m and +6.6% y/y, economists predict that this figure will be +0.5% m/m and +6.5% y/y in October.
United States 10-Year rates are all at 4.106% in the bond markets, minus -0.87%.
The instability in the cryptocurrency market is weighing on investor mood as they continue to analyze the U.S. midterm elections and quarterly corporate earnings, which is why the Euro Stoxx 50 futures are down -0.32% this morning. On Thursday, the political landscape in the United States remained tumultuous, with Republicans moving closer to securing a majority in the House of Representatives and the race for the Senate hanging in the balance. The wave of bitcoin selling sparked by the financial issues at the cryptocurrency exchange FTX is now exerting pressure on stocks.
Today saw the release of data on industrial production in Italy.
Compared to predictions of -1.5% m/m and +0.9% y/y, the Italian September Industrial Production was published at -1.8% m/m and -0.5% y/y.
Today’s Asian stock markets ended down. Japan’s Nikkei 225 Stock Index (NIK) and China’s Shanghai Composite Index (SHCOMP) both finished down.
Ahead of a U.S. inflation update that will probably define the Federal Reserve’s course for future interest rate hikes, China’s Shanghai Composite today closed lower. In addition, China is once more dealing with a COVID outbreak, with Guangzhou, a city in the south, reporting thousands of cases. The picture for the Chinese economy as a whole is still unclear due to mounting worries regarding the nation’s economic activity while strong COVID limits were still in place.
While at the same time, declines in the Chemical, Petroleum & Plastic, Transport, and Railway & Bus sectors caused the Nikkei 225 Stock Index in Japan to end the day lower. The implied volatility of Nikkei 225 options is factored into the Nikkei Volatility, which increased 1.61% to settle at 20.87.
