Hey Folks, with Day Light Savings Time coming to an end this weekend we see the markets are still on fire as we move to the end of 2021. Indeed, what a year! Get me take below in this week’s Round-Up.
WEEKLY SOUND BITES;
It does not get any better than this everyone. US Indexes posted impressive weekly gains reaching all-time highs as a relatively dovish Federal Reserve policy meeting, healthy economic data, and a strong tail end to the earnings season all boosted sentiment toward equities. Technology stocks and small-caps were particularly strong, and growth shares outperformed value stocks. Q3 Earnings also provided an assist with ongoing strong results as profit margins held up well despite higher commodity prices and supply chain disruptions in various industries. The only pullback we’ve experienced in 2021 greater than 5% was this past Sept (first dip greater than 5% in 227 trading days also a record) which mild to say the least and we’ve rallied over 9.9% since then. The path of least resistance still appears to be to the upside.
We also saw at the conclusion of the Feds policy meeting, they will begin to slow its monthly bond purchases by USD 15 billion later this month and in December. By not specifying the speed of the taper beyond December, the widely expected tapering announcement gives the Fed the flexibility to adjust as economic conditions evolve. Factory orders increased 0.2% in September, slightly more than consensus expectations. The government’s October employment report, released on Friday morning, showed 531,000 jobs added, topping consensus estimates. The unemployment rate fell to 4.6%. The Labor Department also said that the economy gained 235,000 more jobs in August and September than it originally estimated. Wages increased in Q3 by 1.3% over Q2 which is the highest since 2001
U.S. Treasury yields decreased amid the Fed’s signals that it will take a patient approach toward monetary policy tightening, leading to gains. Credit spreads (additional yield relative to similar-maturity Treasuries) widened as the Feds announced their monetary tapering plans.
In addition to strong Q3 earnings in the US, shares in Europe also rose on strong Q3 Earning results and signals from the European Central Bank (ECB) that interest rates would stay low for some time. Core eurozone bond yields slipped from earlier highs after ECB President Christine Lagarde pushed back against raising interest rates in 2022. We are also seeing falling PMI data across Europe mostly due to Supply Chain bottlenecks.
Japanese equities were buoyed over the week by the convincing election victory of Prime Minister Fumio Kishida who is publicly for strong stimulus measures. Investors’ focus now turns to the large-scale stimulus package that Kishida has promised to draw up—by mid-November.
Chinese headlines about the beleaguered property sector and a growing COVID-19 outbreak across the country dampened sentiment as the Chinese markets had another down week. China’s property sector is grappling with a deepening liquidity crisis reflected in a wave of offshore debt defaults, credit rating downgrades, and selling in the stocks and bonds of major developers. China’s official manufacturing Purchasing Managers’ Index fell to a worse-than-expected 49.2 in October from 49.6 in September, below the 50-point mark separating growth from contraction.
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
