Hey Folks, markets are still resisting any attempts at moving lower and the Bulls are still in charge. Now we all know this will eventually change but being in a seasonal time of the year where markets want to push higher supported by large cash inflows it will take a very strong and powerful Bear to reverse price action. Where to from here? Get me take below in this week’s round-up.
WEEKLY SOUND BITES:
US Indexes retreated from record highs, as investors confronted data showing the highest inflation in three decades. Tuesday saw the S&P’s first decline in nine sessions, ending its longest winning streak since 2017. However, American wealth has never had it so good seeing it increase by $9.7 Trillion (23%) since the beginning of this year. And even though wages are up nicely, inflation is up higher causing wage gains to evaporate.
The major indexes fell sharply on Wednesday morning following news that the consumer price index (CPI) jumped 0.9% in October, well above consensus expectations of around 0.6%. The increase brought the year-over-year CPI increase to 6.2%, the highest since December 1990. Most observers attributed the surge in inflation to ongoing supply chain pressures and higher consumer demand as the coronavirus ebbs and more people reenter the workforce. Weekly jobless claims hit a new pandemic-era low of 267,000, and the Labor Department reported that there were 10.4 million job openings in September, a slight decline from August’s record but above expectations. University of Michigan reported that their gauge of consumer sentiment fell to its lowest level (66.8) in a decade due to inflation worries. Rising prices for homes, vehicles, and durables were reported more frequently than any other time in more than half a century.
The upside inflation surprise forced U.S. Treasury yields higher, with the benchmark 10-year U.S. Treasury note’s yield ending the week around 1.58%. Investment-grade corporate bond credit spreads widened over the holiday-shortened week, with more volatile and longer-maturity corporates underperforming slightly. And keep in mind that even with the Feds announcement of Quantitative Tightening of $15B month, by the time all of the monthly $120B is taken off, it will still add another $400B to an already bloated US Balance Sheet that is current sitting at $8.5 Trillion. The biggest influence on price action this past week was not the CPI Inflation data but the very poor Bond Auction showing limited interest causing the yields to move up over 14 bps…always remember, that inflation will only matter when the Bond markets say it matters.
Shares in Europe rose as continuing ultra-loose monetary policy and optimism about economic growth helped allay inflation concerns. European nations began adopting or considering restrictions to curb a wave of coronavirus infections on the continent. Eurozone industrial production fell in September by 0.2% for an annual increase of 5.2%. the European Commission (EC) raised its 2021 economic growth forecast for the eurozone to 5.0% from 4.8%. The EC estimated that the eurozone economy would grow 4.3% in 2022 and 2.4% in 2023, with inflation projected to come in at 2.4% in 2021, before slowing to 2.2% in 2022 and 1.4% in 2023. UK economic growth slowed to a 1.3% rate in the three months ended September 30, down from 5.5% in the second quarter
Kishida was reappointed Japan’s prime minister after his party’s convincing win in the October 31 general election who is very dovish which gives the Japanese economy a lift. Meanwhile their producer prices surged 8.0% year on year in October making it the fastest gain in about 40 years.
Chinese stock markets advanced amid speculation that Beijing would announce easing measures to help indebted property companies as the specter of defaults continued to loom over the sector. Property is a key pillar of China’s economy, and worries have grown that the sector’s financial woes could spill into other sectors. China’s producer price index (PPI) accelerated to a greater-than-forecast 13.5% in October over a year ago, a 26-year high, from September’s 10.7% rise.
Enjoy this Week’s Round-Up;
Don’t Be A Rat Brain – Be the Red Stripe Zebra !!
Trade Smart !
hpb
