Oct 17, 2022
VOT Research Desk
After three major US benchmark indices closed lower on Friday as rising expectations for higher for longer inflation added to the Fed’s concerns and pushed growth sectors lower, December S&P 500 futures (ESZ22) are trending up +0.80% this morning. Oil & Gas, Basic Materials, and Technology sector losses primarily weighed down three major U.S. stock indexes.
U.S. stocks opened Friday’s trading session higher, but then fell after University of Michigan data showed that while consumer sentiment improved in October, inflation expectations worsened due to rising gasoline prices.
The main thrust for the market right now is higher interest rates, higher inflation, and the Fed is going to continue to move its fed funds target higher.
U.S. rate futures have priced in a 98.8% chance of a 75 basis point rate increase and a 1.2% chance of a super-sized 100 basis point hike at the monetary policy meeting in November following the economic data from last week.
As the third-quarter earnings season gets under way this week, investors will be paying attention to how major companies are dealing with slowing global growth. S&P 500 companies’ third-quarter profits are expected to rise just 3.6% year-over-year, compared to 11.1% at the beginning of July, according to analysts.
Market participants will also be keeping a close eye on the Philadelphia Fed manufacturing index, industrial production, building permits, housing starts, and data on existing home sales throughout the week. Investors will likely also pay attention to speeches by FOMC member Williams and Fed officials Bullard and Bowman.
Today, the NY Empire State Manufacturing Index data in a few hours will be the focus of all attention. In comparison to the previous value of -1.50, economists anticipate that the figure in October will be -4.00.
Rates on 10-year bonds in the United States currently stand at 3.965%, a decrease of -1.02%.
This morning, the U.K. government plans to restore confidence in its fiscal policies after weeks of turmoil, which is why the Euro Stoxx 50 futures are up +0.92%.Jeremy Hunt, the new British finance minister, will make tax and spending changes later today. Additionally, despite the Bank of England’s emergency bond-buying program’s expiration on Friday, British government bonds resumed trading on Monday.
In a note, analysts at ANZ stated that “the BoE was performing urgent bond-buying with one hand while aggressively increasing the policy interest rate with the other, which is technically equal to QE.
Today saw the release of Italy’s Harmonized Index of Consumer Prices (HICP) and Consumer Price Index (CPI).
In line with expectations, the September CPI in Italy was reported at +0.3% m/m and +8.9% y/y.
In contrast to expectations of +1.7% m/m and +1.5% y/y, the Italian September HICP came in at +1.6% m/m and +1.4% y/y.
As investors prepared for a further tightening of global financial conditions, Asian stock markets settled mixed today. The Shanghai Composite Index (SHCOMP) in China gained 0.42 percent at the close, while the Nikkei 225 Stock Index (NIK) in Japan lost 1.16 percent.
Today, after beginning the day with losses, the Shanghai Composite in China closed higher. Despite promising more market-friendly policies, President Xi Jinping stated that China will not change its strict zero-COVID policy, supporting Chinese stocks. However, a report that Apple has halted plans to use Yangtze Memory Technologies’ memory chips in its products weighed on opinions.
At the same time, losses in the Transport, Fishery, and Marine Transport sectors caused the Nikkei 225 Stock Index in Japan to close lower today. The implied volatility of Nikkei 225 options is taken into account in the Nikkei Volatility, which ended the day at 24.72, down 7.03%.
The August Industrial Production figure in Japan was +3.4% m/m, higher than the +2.7% y/y economic forecast.
The Tertiary Industry Activity Index in Japan has been reported to be higher than
