Last week, investors focused on the US consumer price index. According to the Labor Department report, US inflation growth has slowed down. However, investors are still very concerned as the stock market is not responding with growth. It means hedge funds are cutting their positions ahead of the Fed’s meeting.
The US stock market ended Friday’s trading lower amid negative dynamics from the basic materials, utilities, and technology sectors. At the closing of the exchange, the Dow Jones Industrial Average decreased by 0.48%, the S&P 500 decreased by 0.91%, and the NASDAQ lost 0.91%. At the end of the week, the Dow Jones decreased by 0.23%, the S&P 500 decreased by 0.93%, and the NASDAQ lost 1.1%. Statistically, more than 15% of the S&P 500 stock is down more than 20% from this year’s peak. Many investors are losing faith in the ability of most of the market to maintain profit growth above the current levels. Amid the prospects of loosening monetary policy and increasing tax pressure in the US, and fears of a credit crisis in China and a global increase in the Delta cases, the prospects for further growth of stock indices are limited.
But according to a Bank of America Corp. survey, professional market participants are still investing in stocks, betting that the Federal Reserve will not cut the QE program soon. According to a survey of Bloomberg economists, the Fed is likely to hint at its meeting this week that it will reduce its monthly asset purchases and make an official statement in November. Still, it will keep interest rates near zero level until 2022.
European stock indices closed in the red area on Friday. The German DAX fell by more than 1%, and the British FTSE 100 lost 0.91%. At the end of the week, the DAX lost 1.22%, the FTSE 100 decreased by 0.93%, the French CAC 40 dropped 1.77%, but the Spanish IBEX 35 was an exception and showed an increase of 0.41% per week. Inflationary expectations continue to grow in Germany. Inflation is no longer seen as a temporary phenomenon but as something more permanent. The German inflation expectations index increased by 1.60% last week. It’s the highest level since 2013. The UK said it would try to keep the consequences of a sharp increase in gas prices after the growing concerns that more energy suppliers and food producers would struggle to operate at such high prices.
Australia announced that it would refuse the 2016 deal with France to build a fleet of conventional submarines. Instead, the country will build eight nuclear-powered submarines using American and British technology after concluding a trilateral security partnership. This step caused rage in France, a US, and British NATO ally, prompting it to recall its ambassadors in Washington and Canberra.
China’s manufacturing and retail sectors suffered in August, with production and sales growth reaching a one-year low, as new coronavirus outbreaks and supply disruptions threatened the country’s economic recovery. Concerns about the health of China’s economy and Beijing’s repression of tech companies continue to haunt the region, with stocks in Hong Kong decreasing by more than 3% to their lowest level in nearly 11 months.
The issue of Chinese real estate giant Evergrande and its $300 billion obligations is also open, especially considering the fact that interest on bonds should be paid on Thursday.
Central banks in the US, Japan, Great Britain, Switzerland, Sweden, Norway, Indonesia, Philippines, Taiwan, Brazil, South Africa, Turkey, and Hungary will hold meetings this week.
Main market quotes:
- S&P 500 (F) 4,432.99 −40.76 (−0.91%)
- Dow Jones 34,584.88 −166.44 (−0.48%)
- DAX 15,490.17 −161.58 (−1.03%)
- FTSE 100 6,963.64 −63.84 (−0.91%)
- USD Index 93.25 +0.31 (+0.34%)
Important events for today:
- German Producer Price Index (m/m) at 09:00 (GMT+3);
- Canada Federal Election, All Day.
