U.S Pre Market Brief – Prior to important U.S. PPI Data, stocks were mixed.

Oct 12, 2022
VOT Research Desk

Market Insights & Analysis

After the Nasdaq100 and S&P 500 indexes declined for the fifth consecutive session, investors remained cautious ahead of crucial producer price data and minutes from the most recent Federal Reserve meeting. This morning, December S&P 500 futures (ESZ22) are trending higher by +0.56%.However, following Morgan Stanley’s upgrade of Amgen Inc.’s stock from equal weight to overweight, which resulted in a 5.7% increase in shares, the Dow ended higher.

The losses in the Technology, Telecoms, and Financials sectors weighed heavily on the S&P 500 and NASDAQ Composite, while gains in the Healthcare, Consumer Goods, and Utility sectors helped the Dow Jones Industrial Average finish in the green.

After Bank of England Governor Andrew Bailey instructed pension fund managers to complete rebalancing their positions by Friday, when the BoE is scheduled to conclude its emergency support program for the UK bond market, all three major US benchmark indices edged lower in afternoon trading.

According to Randy Frederick, a managing director of trading and derivatives at Charles Schwab in Austin, “an announcement the Bank of England was going to stop supporting the gilt (UK bonds) market in three days was what caused the latest downturn.”

Loretta Mester, president of the Federal Reserve Bank of Cleveland, made it clear in her remarks that monetary policy needs to become “more restrictive” in order to “put inflation on a sustainable downward path to 2%.”She continued, “I do not anticipate any reductions in the fed funds target range next year.”In the meantime, U.S. rate futures have priced in a 19.2% chance of a rate increase of 50 basis points and an 808.8% chance of a 75 basis point increase at the monetary policy meeting in November.

Likewise, the Worldwide Financial Asset anticipated a moderate 1.6% development in the U.S. economy this year.

In the coming hours, all eyes will be on the U.S. Producer Price Index (PPI) data. In comparison to the previous figure of -0.1% m/m, economists anticipate that September PPI will reach an average of +0.2% m/m.

Additionally, investors will likely look to the minutes of the Federal Reserve’s September meeting for clues regarding potential future rate hikes.

Additionally, U.S. September Core PPI data will be released today. In comparison to the previous value of +0.4% m/m, economists anticipate this figure to be +0.3% m/m.

Rates on 10-year bonds in the United States currently stand at 3.923%, a decrease of -0.41%.

As investors await U.S. PPI data, the Euro Stoxx 50 futures are up +0.45% this morning. However, with concerns about global growth dominating sentiment, those gains are likely to be unstable. Concerns about the impact of tighter monetary policies and rising inflation on corporate profits were also fueled by inconsistent earnings reports.

Tuesday, the International Monetary Fund decreased its estimate for global economic growth in 2023 from 2.9% in July to 2.7%.As a result of Russia’s invasion of Ukraine, it stated, Europe faces a significant recession risk.

Today, data on GDP, industrial production, manufacturing production, monthly GDP 3M/3M Change, trade balance, and industrial production in the Eurozone were made public.

Compared to expectations of 0.0% m/m and 2.4% y/y, the UK’s GDP was reported at -0.3% m/m and +2.0% y/y.

The August industrial production rate in the United Kingdom was -1.8% m/m, below expectations of -0.2% m/m.

In contrast to expectations of +0.2% m/m, the United Kingdom’s manufacturing production in August came in at -1.6% m/m.

Compared to expectations, the UK’s monthly GDP 3M/3M Change was -0.3%, which was lower.

The Eurozone’s August industrial production increased by +1.5% m/m, exceeding expectations of +0.6% m/m. The United Kingdom’s August trade balance was -19.26 billion, exceeding expectations of -20.40 billion.

Today’s trading on Asian stock markets was mixed. The Shanghai Composite Index (SHCOMP) in China finished the day up 1.53 percent, while the Nikkei 225 Stock Index (NIK) in Japan finished down 0.02%.

Today, ahead of the key U.S. economic data due later this week, the Shanghai Composite in China recovered and closed in the green. Earlier, the index lost more than -1.5%.Additionally, SK Hynix Inc.,a chipmaker, and Samsung Electronics Co., a technology conglomerate, will be permitted to import chips made in the United States for use in their factories in China.

At the same time, losses in the Electrical/Machinery, Precision Instruments, and Machinery sectors caused Japan’s Nikkei Stock Index to close lower today. The implied volatility of Nikkei 225 options is taken into account in the Nikkei Volatility, which ended the day at 25.97, up 11.32 percent.

PIVOTS (Daily)