The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects. When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks. The medium- to long-term consequences, on the other hand, could be significant. It is possible that we are at the beginning of a new bloc formation or a new Cold War. This would put a significant damper on globalization and further fuel higher structural inflation.
US equities snapped a two-day winning streak to finish lower as investors weighed a host of earnings and economic reports and eyed a noticeable rise in Treasury yields. The Dow Jones Industrial Average fell 0.3%, the S&P 500 shed 0.7%, and the Nasdaq Composite decreased 0.9%. European equities were little changed following hot inflation data out of the region, with the exception of the broader Euro Stoxx 50 notching a gain of 0.2%.
- Asian equity markets fell on Thursday as investors continued to fret about a faster pace of monetary tightening by the US Federal Reserve compared to most Asian economies, which could drive further capital outflows in the region. Shares in Australia, Japan, South Korea and Hong Kong all declined. Mainland China shares also slumped as the People’s Bank of China kept its benchmark lending rates steady to counter further yuan depreciation and avoid even wider policy divergence.
- Oil prices were mixed this morning, as conflicting factors led to a highly uncertain outlook for energy markets.
- European shares are on track for declines when they open this morning while US equity futures are pointing to a mixed opening this afternoon.
- Housing data was in focus yesterday in the US, as mortgage applications declined last week, while housing starts fell more than anticipated and building permits rose unexpectedly.
- The UK’s Consumer Price Index (CPI) data showed that September inflation rose more than expected month-on-month (m/m), remaining at last month’s 0.5% growth rate, and climbing 10.1% year-on-year (y/y). The core rate was also higher than anticipated, coming in lower than August’s level with a reading of a 0.6% increase m/m but up 6.5% y/y. Also, the Producer Price Index (PPI) indicated that the price of goods and raw materials purchased by manufacturers unexpectedly increased m/m in September and was higher versus the same period last year.
- Out of the Eurozone, September CPI data denoted a 1.2% m/m rise in inflation, in-line with estimates but twice as high as the previous reading. CPI was 9.9% higher compared to the same time last year, which was slightly below forecasts, but still higher than August’s 9.1% growth rate.
- Malta’s annual inflation rate surged to 7.4% in September, hitting its all-time high since records began in in 1997 and following a 7% rise in the previous month. Main upward pressure came from food and non-alcoholic beverages. Prices also rose faster for restaurants and hotels, along with housing and utilities. Meanwhile, inflation eased for transport. On a monthly basis, consumer prices were 0.6% lower, after accelerating by 1% in the previous month.
- Federal Reserve Bank of St. Louis President James Bullard said he expects the central bank to end its “front-loading” of aggressive interest-rate hikes by early next year and shift to keeping policy sufficiently restrictive with small adjustments as inflation cools. Bullard has been among the most hawkish Fed officials this year and was the first to publicly suggest hikes of 75 basis points.
- Procter & Gamble reported better than expected sales and earnings for its fiscal Q1 2023. The company reduced its outlook for fiscal 2023 all-in sales, and noted that it expects EPS results to be at the low end of the range due to foreign exchange headwinds.
- Tesla reported mixed Q3 results after the market close on Wednesday with a beat on the bottom line and a miss on the top line. The company said it expects to miss its vehicle delivery target this year but downplayed concerns about softening demand. Tesla was aiming for 50% growth this year from the 936,172 cars it delivered in 2021.
- IBM beat quarterly revenue estimates on Wednesday and said it expected to exceed full-year revenue growth targets as robust demand for its digital services helps cushion the blow from a strong dollar.