Another wild ride is now in the books for the markets as we are seeing decades old records being made. This week we saw the largest intra point swing on Thursday in major US Indexes in the past decade. Get my take on where we are going from here.
Markets ended mostly lower this week, as third-quarter earnings reporting season began in earnest and investors weighed inflation data and their implications for Federal Reserve policy. By the end of the week, the S&P 500 Index had surrendered nearly half of its gains since its March 2020 bottom including a “rip your shirt off” move on the CPI data print with a sharp early drop followed by a 5.5% surge to the upside in the S&P 500 marking its largest intraday move since March 25, 2020. And the IMF updated its forecast for global economic growth in 2022 and 2023, and the message was clear – expect a slowdown. Forecasts are for 3.2% global GDP growth in 2022, a figure that is expected to fall to 2.7% in 2023.
The Labor Department reported that producer prices rose 0.4% in September, double consensus expectations for around a 0.2% increase. On a year-over-year basis, prices rose 8.5%, a tick above expectations but still the third straight monthly decline and well below March’s peak of 11.7%. And Thursday’s CPI inflation data showed lower wholesale prices were not yet filtering down to consumers with core consumer prices rising 6.6% on a year-over-year basis in September. This was more than expected, above the previous March peak, and the fastest pace in four decades.
The Treasury yields rose over the week, with the 10-year U.S. Treasury note yield moving above 4.0%, while the two-year yield hit 4.5%, its highest level since 2007.
The UK economy unexpectedly shrank 0.3% sequentially in August due to a fall in industrial output while the labor market tightened with the unemployment rate falling to 3.5%. Continued fallout in the UK prompted the government to significantly alter its proposed tax plan. Meanwhile across the Euro Zone industrial production climbed 1.5% sequentially in August—much more than forecast and partially reversing a 2.3% monthly drop in July. However, the German government slashed its economic forecasts for the next two years because of price increases, energy shortfalls, and supply chain disruptions caused by Russia’s invasion of Ukraine.
While U.S. news was a key driver, Japanese markets also digested local data releases. A survey released midweek showed business confidence among big manufacturers fell for a second straight month to its lowest level in five months. In the currency market, hawkish Fed rhetoric saw the yen weaken further against the greenback.
China’s stock markets rose after the weeklong National Day Holiday, lifted by supportive central bank comments and anticipation of policy signals during the Communist Party Congress, a twice-a-decade gathering of the country’s political elite that began on Sunday. The People’s Bank of China (PBOC) will focus on supporting infrastructure construction and enabling quicker delivery of home projects, according to PBOC. And like the Yen, the Yuan has lost more than 10% against the dollar this year and is on track for its biggest annual loss since 1994. In economic news, China reported that tourism revenue during the weeklong National Day break, typically a peak period for travel and consumption, fell 26% from a year ago
Enjoy this week’s Round-Up;
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