Sustainable inflation could trigger new recessions in most economies

The US stock market closed in the green for the third trading session in a row. At the close of the trading session, the Dow Jones increased by 0.98%, the S&P 500 index increased by 0.83%, and the NASDAQ index added 1.05%. Representatives of the Republican and Democratic parties in the Senate reached an agreement to increase the national debt ceiling by $480 billion. It will allow the Treasury Department to continue funding the government spending through early December. The initial jobless claims in the US declined last week. The number of new applications for the week was 326,000 (forecast 348,000). It is the lowest quarterly figure since 1997. Last week it was at 350,000. The labor market is improving, which leaves no doubt that the Fed will start cutting the QE program in early November. Investors' attention is now focused on today's Nonfarm payrolls.

European stock indices also showed strong gains yesterday. The British FTSE 100 increased by 1.17%, German DAX added 1.85%, French CAC 40 added 1.65%, Spanish IBEX 35 and Italian FTSE MIB jumped by 2.14% and 1.51%, respectively. The Bank of England's chief economist says there are growing concerns about inflation in the United Kingdom, which will last longer. Since concerns about inflation persist, Barclays expects a period of higher volatility and lower yields for European stock markets. However, an ECB spokesman said yesterday that the short-term rise in inflation is mainly due to temporary causes that will disappear in the long term and will not require policy tightening.

Following Denmark and Sweden, Finland is suspending the use of the Moderna vaccine against COVID-19 for young people.

The Bank of Israel will complete an 85 billion shekel ($26.3 billion) bond-buying program in the coming months. The interest rate remained unchanged at 0.1%.

Oil increased to its highest level since 2014 this week due to the energy crisis in Europe. Asia raised the prospect of higher demand for crude and refined products ahead of winter. At the same time, OPEC+ said it would restore only a relatively modest amount of supply to the market in November. Goldman Sachs says the likely release of crude from the US Strategic Petroleum Reserve (SPR), which could be as much as 60 million barrels, poses a downside risk of just $3 per barrel compared to the year-end Brent crude price forecast of $90 per barrel.

Russia proposed to soften the crisis with natural gas. After this statement by Russian President Vladimir Putin, natural gas prices began to decline steadily.

Chinese markets have returned to a more positive mood after a long holiday due to improved activity in the service sector. On the other hand, the total electricity consumption in China may decline 10-15% in November and December, potentially leading to a 30% slowdown in activity in sectors such as metals, chemicals, and cement production. Biden and Chinese President Xi Jinping are likely to hold working talks in a virtual format before the end of this year.

Taiwan's president says that Taiwan is not seeking a military conflict with China but will defend itself if necessary.

India's central bank left the interest rate unchanged and promised enough liquidity to support economic recovery.

Main market quotes:

S&P 500 (F) 4,399.76 +36.21 (+0.83%)

Dow Jones 34,754.94 +337.95 (+0.98%)

DAX 15,250.86 +277.53 (+1.85%)

FTSE 100 7,078.04 +82.17 (+1.17%)

USD Index 94.20 -0.06 (-0.07%)

Important events for today:
  • – Australia RBA Financial Stability Review at 04:30 (GMT+3);
  • – ECB President Cristine Lagarde’s Speech at 15:05 (GMT+3);
  • – Treasury Sec Janet Yellen’s Speech at 15:05 (GMT+3);
  • – US Nonfarm Payrolls (m/m) at 15:30 (GMT+3);
  • – US Unemployment Rate (m/m) at 15:30 (GMT+3);
  • – Canada Unemployment Rate (m/m) at 15:30 (GMT+3).

by Justforex, 2021.10.08

We advise you to get acquainted with the daily forecasts for the major currency pairs.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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