Investors continue to worry about inflation

Last week, the US stock market closed positively. On Friday, the S&P 500 index increased by 0.75% (+1.96% for the week), Dow Jones added 1.09% (+1.64% for the week), and NASDAQ increased by 0.5% (+2.46% for the week). The Dow Jones closed above 35,000, the highest weekly percentage gain since June. The US Commerce Department data released on Friday showed a surprising increase in retail sales in September. Still, the October consumer confidence index from the University of Michigan was worse than expected.

US President Joe Biden signed into law a temporary increase in the US debt limit. The $480 billion increase in the borrowing limit is expected to be exhausted by December 3rd.

The United States is removing all restrictions from November 8 on the entry for tourists who have passed the full course of coronavirus vaccination.

European stock indices closed the week in the green zone thanks to the strong start of the corporate reporting season. British FTSE 100 gained 0.37% on Friday (+1.95% for the week), French CAC 40 increased by 0.63% (+2.77% for the week), Spanish IBEX 35 added 0.81% (+0.73% for the week), Italian FTSE MIB increased by 0.81% (+1.85% for the week), and German DAX jumped by 0.81% (+3.12% for the week, the best result among all European indices). Consumer prices in the euro area increased to 3.4% in September, the highest level in 13 years. However, ECB head Christine Lagarde still believes that inflation in the euro area is temporary, and the ECB monetary policy is aimed to maintain favorable financing conditions for all sectors of the economy.

Record revenues from natural gas and fish exports helped Norway post its highest-ever trade surplus last month. Europe continues to actively withdraw gas from storage, reducing reserves for the second day in a row. In Spain, the price of electricity is rising four times faster than the European average. Many politicians believe that the introduction of Nord Stream 2 can improve the situation in the European market. The UK government will fund a new nuclear power plant as part of a program to achieve net zero emissions.

Oil prices continue to rise amid an energy crisis as demand shifts from expensive natural gas and coal to cheaper oil. Oil prices have been increasing for the eighth week straight, with WTI crude rising above $83 for a barrel, its highest level since 2014. Brent has approached $86 for a barrel. Investors continue to worry about inflation amid growing energy shortages that are causing even more production cuts.

Asian stock indices also closed the week on a positive note. Japan's Nikkei 225 increased by 1.81% on Friday (+3.90% for the week), China's CSI 300 added 0.38% (-0.19% for the week), Australia's ASX 200 increased by 0.69% (+0.57% for the week), and South Korea's KOSPI jumped by 0.88% (+1.25% for the week). But most Asian stocks fell on Monday amid weak economic data on China that showed a slowdown in the recovery. China's Q3 2021 GDP showed +4.9% growth (expectations +5.2%; previous +7.9%), industrial production increased by 3.1% (forecast 3.8%, previous 5.3%), unemployment rate declined to 4.9% (forecast 5.1%, previous 5.1%).

On October 23, the grace period for the first non-payment expires, so that date could be the beginning of China Evergrande's default.

Alibaba will release its own 5nm Arm processor to compete with Amazon and Huawei, making it another Chinese tech company.

New Zealand's consumer price index (CPI) increased by 2.2% in the third quarter, the largest quarterly change since December 2010. Annual inflation rose to 4.9%, up from a 3.3% increase in the previous quarter, also the biggest annual change in more than a decade.

Japan's Toyota will cut production by 15% in November due to chip shortages.

Australia will partially cancel lockdowns amid vaccination progress.

Main market quotes:

S&P 500 (F) 4,471.37 +33.11 (+0.75%)

Dow Jones 35,294.76 +382.20 (+1.09%)

DAX 15,587.36 +124.64 (+0.81%)

FTSE 100 7,234.03 +26.32 (+0.37%)

USD Index 93.95 −0.02 (−0.02%)

Important events for today:
  • – New Zealand Consumer Price Index (m/m) at 00:45 (GMT+3);
  • – China GDP (q/q) at 05:00 (GMT+3);
  • – China Retail Sales (m/m) at 05:00 (GMT+3);
  • – China Industrial Production (m/m) at 05:00 (GMT+3);
  • – China Unemployment Rate (m/m) at 05:00 (GMT+3);
  • – US Industrial Production (m/m) at 16:15 (GMT+3);
  • – Canada BoC Business Outlook Survey (m/m) at 17:30 (GMT+3).

by Justforex, 2021.10.18

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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