The US inflation data and congressional election results are in focus for investors today

By JustMarkets

Global stock markets declined yesterday, and the US dollar rose against a basket of major currencies as the US Congressional election and President Joe Biden’s agenda remain unclear after the midterm vote. As the stock market closed, the Dow Jones index (US30) decreased by 1.95%, and the S&P 500 index (US500) lost 2.08%. Technology Index NASDAQ (US100) fell by 2.48% yesterday.

New inflation data will be released in the US today. Analysts forecast that the annual inflation rate will fall from 8.2% to 8%, while core inflation will drop from 6.6% to 6.5%. If the data falls within that range, the dollar index could see a sharp decline on the back of the fact that inflation has already peaked and the US Federal Reserve will be slowing the pace of interest rate hikes. That would give stock indices a boost. But if the data turn out to be worse than expected and the inflation indicators (especially the core inflation) show further growth, the dollar index, on the contrary, can get support, which will lead to a sharp drop in indices. Either way, a tight labor market underscores the relatively slow decline in inflation over the coming months, which was a major factor in this week’s midterm elections.

Federal Reserve Bank of Minneapolis President Neel Kashkari warned Wednesday that it is premature to expect a “dovish reversal” from the Fed and that interest rates will continue to rise. Fed spokesman Barkin said Wednesday that fighting inflation could lead to a downturn in the economy, but that’s a risk the Fed would have to take. This is not the first such statement by Fed policymakers. The only question is whether Fed policy will change after the US Congress reshuffles.

Stock markets in Europe were down yesterday. German DAX (DE30) decreased by 2.48%, French CAC 40 (FR40) fell by 0.17%, Spanish IBEX 35 (ES35) gained 0.52%, and British FTSE 100 (UK100) closed at minus 0.14%.

UK GDP is projected to be down by 0.5% in the third quarter, up from 0.2% in the second quarter. This could be the first of two necessary negative quarters to talk about a recession technically. Annual GDP growth is expected to fall to 2.1% from 4.4%. Analysts also forecast that UK investment will fall to 1.3% in the third quarter, down from 3.7% previously, and the industrial production index will fall to 4.3%, down from 5.2% previously. These factors could play an important role in how the market handles the GDP numbers tomorrow.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.56%, Hong Kong’s Hang Seng (HK50) lost 1.20%, and Australia’s S&P/ASX 200 (AU200) was up 0.58% by the end of the day.

An internal analysis of New Zealand’s central bank decisions over the past five years showed that a sharp easing of monetary policy was largely justified because of the pandemic, but in hindsight, monetary policy should have been tightened earlier in 2021.

Weak economic data from China released earlier this week caused more concern about the world’s second-largest economy, which is struggling to control the worst COVID outbreak since May. This has led to the reintroduction of COVID restrictions in several major economic centers. The economic turmoil in China has worsened attitudes toward most economies in the region.

Bank of Japan (BOJ) Governor Haruhiko Kuroda said Thursday that he has no desire to be re-elected to a new five-year term as head of the central bank after his current term expires next April. This increases the probability that the BOJ will change its monetary policy in the spring of 2023, as Kuroda is a fan of soft stimulative policies.

S&P 500 (F) (US500) 3,748.57 −79.54 (−2.08%)

Dow Jones (US30) 32,513.94 −646.89 (−1.95%)

DAX (DE40) 13,666.32 −22.43 (−0.16%)

FTSE 100 (UK100) 7,296.25 −9.89 (−0.14%)

USD Index 110.47 +0.84 (+0.76%)

• – FOMC Member Waller Speaks at 09:00 (GMT+2);
• – US Consumer Price Index (m/m) at 15:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+2);
• – Canada BoC Gov Macklem Speaks at 18:50 (GMT+2);
• – US FOMC Member Mester Speaks at 19:30 (GMT+2);
• – US FOMC Member George Speaks at 20:30 (GMT+2).

By JustMarkets

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.