Calm after – or before – the storm
A look at the day ahead from Sujata Rao.
Central banks managed to reverse the most aggressive rate hike bets, US employment data last week was strong, and a $ 1 trillion infrastructure bill passed .
Short-term Treasury yields are down 15 basis points from highs reached last week and Chinese export data for October has beaten expectations.
But despite this backdrop, global equities are struggling to advance after hitting record highs. Wall Street futures, at least so far, are in the red.
Perhaps the opinion is that this is a reprieve and that it won’t be long before the US Federal Reserve starts to turn hawkish; The October payroll showed significant job additions as well as an increase in hourly wages. So take a look at the many Fed speakers today, including Vice President Richard Clarida.
Recent central bank-related volatility will also put emphasis on economic data – Wednesday’s US inflation figure is the centerpiece – which should show further acceleration in price growth – the indicator tracked. German economic sentiment ZEW Tuesday.
As for today, excitement is building (again!) As speculators may be rushing into this sell-off, Frankfurt-listed stocks are down 9%.
Finally, the impact of ongoing regulatory repression in China continues to be felt. SoftBank’s Vision fund hit $ 10 billion from its Chinese tech holdings, with its main asset, e-commerce company Alibaba, losing a third of its value in the second quarter, for example.
Later today, infrastructure-related stocks could benefit from the passage of the US bill, with oil already up 1%. Finally, starting today, vaccinated non-US citizens can travel to the US without restrictions, potentially paving the way for higher airline and jet fuel prices.
Key developments that should provide more direction to markets on Monday:
-Chinese exports in October exceed expectations and offer a buffer to slowing economy
– Some investors did not receive Evergrande unit bond interest due on November 6, sources say
-United Kingdom appears ready to invoke emergency measures on trade with Ireland
– Temporary higher euro area inflation
– Fed Speakers: Philadelphia President Patrick Harker, Chicago President Charles Evans, Interim Boston President Kenneth Montgomery, Vice President Richard Clarida
– Euro zone finance ministers meet
– Auction of American banknotes at 3 years
(For a chart on rising inflation – https://fingfx.thomsonreuters.com/gfx/mkt/klpykdeakpg/Pasted%20image%201635972322848.png)
(Reporting by Sujata Rao; editing by Dhara Ranasinghe)