VOT Research Report
Analytics and Recommendations
After three significant US benchmark indices rallied for a third straight session, the December S&P 500 futures (ESZ22) are trending down -0.52% this morning as market players prepared for this week’s expected U.S. inflation data and anticipated the outcome of the midterm elections, which could signal a change in Washington’s balance of power. Gains in the Basic Materials, Telecoms, and Industrials sectors were principally responsible for the acceleration of three major U.S. stock indices.
The outcome of the midterm elections in the United States will determine whether Democrats lose or retain control of Congress midway through President Joe Biden’s term, increasing the likelihood of legislative impasse. According to unbiased projections and polls, Republicans had a good chance of taking control of the House and a close contest for the Senate.
According to Joseph Sroka, chief investment officer at Atlanta-based NovaPoint, “A more conservative fiscal policy, which could be imposed by a Republican-controlled Congress, would put less inflationary pressure on the economy, and that would make the Fed’s job much easier.”
However, a shock victory for the Democrats will probably cause them to worry about budget spending and regulations on the tech industry that could increase already-high inflation.
Markets are also anticipating critical consumer pricing data that is scheduled for release on Thursday. This data is expected to reveal a slowdown in consumer price growth and offer additional hints as to whether the U.S. Federal Reserve will scale down its hawkish interest rate increases.
In the meanwhile, 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.
All eyes are on the U.S. Crude Oil Inventories statistics that will be released in a few hours. Crude oil stockpiles are expected to be 1.360 million more than last week’s level of -3.115 million, according to economists’ predictions on average.
Data on U.S. wholesale inventories will also be released today. Compared to the previous figure of 0.8% m/m, economists predict that this figure will be 0.8% m/m.
United States 10-Year rates are already at 4.149% in the bond markets, rise +0.51%.
As investors around the world await the results of the U.S. midterm elections to see if there will be a change in control in Washington, the Euro Stoxx 50 futures are down -0.70% this morning, down from eight-week peaks. A better-than-expected earnings season revealed that most business earnings withstood increased inflation and sluggish growth, which helped to boost Europe’s benchmark index in the fourth quarter. The U.S. inflation reading for October is what everyone will be watching for tomorrow.
The market’s preference for value over growth has been the main driver of European equities’ strong performance over the past month,
On Wednesday, the economic data calendar in Europe is largely barren.
Today’s Asian stock markets ended down. Japan’s Nikkei 225 Stock Index (NIK) and China’s Shanghai Composite Index (SHCOMP) both had declines of -0.53% and -0.56%, respectively.
Due to deteriorating economic conditions, China’s Shanghai Composite today closed lower. According to the data, the nation’s Producer Price Index decreased for the first time in a year and was at -1.3% y/y. In October, consumer inflation was 2.1% y/y, below estimates of 2.4% y/y due to COVID-19 lockdowns that slowed down local economic activity. The depressing economic data worsened opinions of Chinese markets, and there were less and fewer signs that the government would relax its stringent COVID-19 policy.
While at the same time, losses in the Power, Financial Services, and Warehousing sectors caused the Nikkei 225 Stock Index in Japan to end the day down. The implied volatility of Nikkei 225 options is factored into the Nikkei Volatility, which decreased by 2.56% to settle at 20.54, a new 1-month low.
