Oct 3, 2022
VOT Research Desk
Key Insights and Analysis
After three major US benchmark indices veered to a sharply lower end on Friday, December S&P 500 futures (ESZ22) are trending down -0.16%, erasing early gains as investors prepared for additional Federal Reserve rate hikes to bring inflation down.
Losses in the Consumer Goods, Utilities, and Technology sectors accounted for the majority of the weighting in three major stock indexes in the United States.
The S&P 500 is down almost 25% so far this year, while the Nasdaq is down about 33% so far this year. Meanwhile, the yield on a 10-year Treasury note recently reached its highest level since 2008.The Dow also finished its worst quarterly losing streak since 2015 at the same time.
The third consecutive quarter in the red was completed by all three benchmark indices.
The core personal consumption expenditure price index was reported at +0.6% m/m, exceeding the forecast of +0.5% m/m. This indicates that inflation was higher in August than anticipated. Stifel noted in a note that this “compounds the pressure for the Fed to stay on course in its fight against inflation.”Additionally, Lael Brainard, vice chair of the Fed, stated that the central bank’s policy would need to be “restrictive for some time” in order to “have confidence that inflation is moving back to target.”
In the meantime, U.S. rate futures have priced in a 45.7% chance of a 50-basis-point increase and a 54.3% chance of a 75-basis-point increase at the monetary policy meeting in November.
Investors will closely monitor U.S. employment data throughout the week to determine whether the Fed’s rate increases are beginning to impede growth.
The unemployment rate in September is expected to remain unchanged at 3.7%, according to economists on average.
Investors are likely to focus on September ISM Manufacturing Purchasing Managers Index (PMI) data from the United States, which showed a reading of 52.8 in August. The new number, according to economists, will be 52.2.
Rates on 10-year bonds in the United States currently stand at 3.789%, a decrease of -0.41%.
This morning, investors are pondering the recurrence of regional energy issues, political unrest in the United Kingdom, and concerns regarding the health of Swiss banking giant Credit Suisse. As a result, the Euro Stoxx 50 is down -1.54%.
Over the weekend, Gazprom put an end to its gas deliveries to Italy, claiming that it had not received approval for the pipeline to flow through Austria.
Following a bruising reaction from the markets and a growing outcry from Conservatives against the policy, the government of Liz Truss has abandoned its plan to revoke the top income tax rate of 45 percent.
The Financial Times reported on Sunday that executives at Credit Suisse spent the weekend reassuring investors about the bank’s financial health following the bank’s credit default swaps reaching their highest level in ten years.
Today’s data included the Switzerland Consumer Price Index (CPI), Spain Manufacturing PMI, Switzerland procure.ch PMI, Italy Manufacturing PMI, France Manufacturing PMI, Germany Manufacturing PMI, Eurozone Manufacturing PMI, and United Kingdom Manufacturing PMI.
The September CPI in Switzerland was reported at -0.2% m/m, below expectations of +0.2% m/m
In September, the manufacturing PMI in Spain fell below expectations to 49.0.
The procure.ch PMI for Switzerland in September was 57.1, exceeding expectations of 54.5.
The manufacturing PMI for September in Italy was 48.3, exceeding expectations of 47.5.
The Manufacturing PMI for France in September came in at 47.7, below expectations of 47.8.
The German Manufacturing PMI for September came in at 47.8, below expectations of 48.3.
The Manufacturing PMI for the Eurozone in September was 48.4, which was lower than the expected 48.5.
In September, the manufacturing PMI in the United Kingdom fell below expectations to 48.4.
Today, Asian stock markets closed in the green. Japan’s Nikkei 225 Stock Index (NIK) closed up +1.03%, while the Chinese market was closed for holidays.
After chip shares rose as a result of Mimasu Semiconductor’s better-than-expected quarterly earnings, Japan’s Nikkei 225 Stock Index closed higher today. Gains in the Food, Fishery, and Pharmaceutical Industry sectors fueled the index’s upward momentum. The implied volatility of Nikkei 225 options is taken into account in the Nikkei Volatility, which reached a new three-month high of 26.33 at the close.
In contrast to expectations of 11, Japan’s Tankan Large Manufacturers Index was reported at 8 in the third quarter.
In the third quarter, the Japanese Tankan Large Non-Manufacturers Index was 14;
