Last week, investors focused on the release of the ECB’s monetary policy plans. The European Central Bank left the interest rate unchanged and slightly raised its inflation target this year. But the ECB will likely start to reduce its stimulus program in the next quarter. Such news had a negative impact on the US market as well. Also, investors are now inclined to believe that the Federal Reserve will follow its colleagues from Europe and start cutting its quantitative easing program next quarter as well. A lot will depend on inflation data released this week in the USA, Canada, Great Britain, Europe, and Japan.
The US stock market finished Friday’s trading with a decline amid negative dynamics from the utilities, technology, and health care sectors. Dow Jones index lost 0.78% (-2.24% for the week) reaching a monthly minimum, S&P 500 decreased by 0.77% (-1.63% for the week), NASDAQ index lost 0.87% (-1.29% for the week). Apple shares were the biggest fallers among the Dow Jones components, falling by 3.3%. It becomes clear that investors and hedge funds are cutting their positions now.
US Democratic senators have proposed imposing a 2% tax on the amount that public companies spend on stock buybacks. Given the Democrats’ plans to substantially increase taxes on large corporations, such rhetoric puts negative pressure on major US stock markets. On the other hand, tax benefits for electric vehicles will be expanded.
The main European stock indexes closed in the red zone on Friday. The only exception was the British FTSE 100 index, which increased by 0.07%. But by the end of the week, the index lost 1.53%. German DAX lost 1.32% at the end of the week. The correlation between the American and the European indices is clearly seen again. Considering the fact that the ECB plans to start cutting back its stimulus program in the next quarter, traders should not expect significant growth of the main European indices.
Oil prices increased to $73 a barrel on Friday, helped by growing signs of a US inventory shortage in the wake of Hurricane Ida and the hopes for a renewal of trade between the US and China, which boosted riskier assets. Two OPEC+ sources said Monday the group would lower its 2022 oil demand growth forecast as the spread of the Delta virus casts doubt on fuel demand growth.
Asia-Pacific stock indices opened the trading week lower, following Friday’s negative performance by US indices last week. Japan’s Nikkei 225 index has already lost 0.3% since the opening session, Hong Kong’s Hang Seng index decreased by 2.2%, China’s Shanghai Composite decreased by 0.2%, South Korea’s KOSPI lost 0.5%. In Japan, the PPI index increased by 5.5% in August compared to the same period of the previous year. Shares of Chinese technology companies are falling again amid increasing control by the authorities. Regulators have strongly warned internet platforms not to try to bypass recently introduced restrictive measures.
Main market quotes:
- S&P 500 (F) 4,458.58 −34.70 (−0.77%)
- Dow Jones 34,607.72 −271.66 (−0.78%)
- DAX 15,609.81 −13.34 (−0.085%)
- FTSE 100 7,029.20 +4.99 (+0.07%)
- USD Index 92.64 +0.16 (−0.17%)
Important events for today:
- Japan PPI (m/m) at 02:50 (GMT+3).
