The situation in the Middle East is heating up. Inflation data in China disappointed investors

By JustMarkets

At Wednesday’s stock market close, the Dow Jones Index (US30) decreased by 0.51%, while the S&P 500 Index (US500) lost 0.62%. The NASDAQ Technology Index (US100) closed yesterday negative by 0.63%. Stocks posted moderate losses on Thursday amid a stronger-than-expected US CPI report for September. In addition, weekly US initial jobless claims remained unchanged, which was hawkish for Fed policy. Thursday’s hawkish reports keep the likelihood of another Fed rate hike this year alive. Stocks continued to lose ground Thursday afternoon as T-bond yields rose further amid weak demand at the $20 billion auction of 30-year Treasury bonds.

Concerns that the conflict between Israel and Hamas will spread to the Middle East was another negative factor for stocks amid reports that Israel launched airstrikes on major airports in Damascus and Aleppo in Syria. In turn, Iran has begun moving military equipment to its western border. Whether this equipment will travel further through Iraq toward Israel is still unknown, but the geopolitical risks of another major war have increased significantly in recent days.

The US Consumer Price Index for September came in at 3.7% y/y, unchanged from August and stronger than the 3.6% y/y decline. The core CPI excluding food and energy for September declined to 4.1% y/y from 4.3% y/y in August, which was in line with expectations. US weekly initial jobless claims were unchanged at 209,000, indicating a slight strengthening of the labor market compared to expectations of a rise to 210,000.

FRB Boston President Collins commented that she favors a pause in Fed rate hikes.

Equity markets in Europe traded lower yesterday. Germany’s DAX (DE40) decreased by 0.23%, France’s CAC 40 (FR40) lost 0.37% on Thursday, Spain’s IBEX 35 (ES35) was 0.26% cheaper, and the UK’s FTSE 100 (UK100) closed positive by 0.32%.

ECB Governing Council spokesperson Centeno said yesterday, “At the current level of interest rates, we will make a significant contribution to the 2% inflation target. We will achieve this target by continuing with this monetary policy stance, holding it for some time until we are fully confident that inflation is falling.” Another representative of the ECB Governing Council, Wunsch, said, “If we continue to see inflation figures in line with the forecast, we will not need to raise interest rates again.” Minutes from the ECB’s September 13-14 meeting showed that the risks of too much tightening and too little tightening have become more balanced and the ECB will hold off on raising interest rates.

Crude oil prices gave up early gains on Thursday amid a stronger dollar and after the EIA’s weekly crude oil inventories report showed an unexpected rise in crude stockpiles and US crude production hit a record high. Oil initially opened higher on Thursday on concerns over the escalating conflict between Israel and Hamas. Oil was also supported by comments from Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, who said oil producers will continue to work together and be proactive to keep the oil market balanced.

Asian markets were predominantly rising yesterday. Japan’s Nikkei 225 (JP225) rose by 1.75%, China’s FTSE China A50 (CHA50) gained 0.85%, Hong Kong’s Hang Seng (HK50) rose by 1.93% and Australia’s ASX 200 (AU200) ended the day positive by 0.04%.

In China, the Consumer Price Index (CPI) was unchanged in September, missing forecasts for a 0.2% y/y rise. In August, the CPI rose by 0.1% y/y. On an annualized basis, core inflation, excluding food and fuel prices, was up by 0.8%, the same as in August. The Producer Price Index (PPI) fell to 2.5% y/y, marking the 12th consecutive negative month, although the rate of decline slowed from August. Economists had forecast a drop to 2.4% y/y. CPI inflation at zero indicates that deflationary pressures in China remain a real threat to the economy. The recovery in domestic demand will not be strong without significant stimulus from the government.

S&P 500 (F)(US500) 4,349.61 −27.34 (−0.62%)

Dow Jones (US30) 33,631.14 −173.73 (−0.51%)

DAX (DE40)  15,425.03 −34.98 (−0.23%)

FTSE 100 (UK100) 7,644.78 +24.75 (+0.32%)

USD Index  106.58 +0.76 (+0.72%)

• – Singapore GDP (q/q) at 03:00 (GMT+3);
• – China Consumer Price Index (m/m) at 04:30 (GMT+3);
• – China Producer Price Index (m/m) at 04:30 (GMT+3);
• – China Trade Balance (m/m) at 06:00 (GMT+3);
• – Sweden Consumer Price Index (m/m) at 09:00 (GMT+3);
• – Switzerland Producer Price Index (m/m) at 09:30 (GMT+3);
• – UK BoE Gov Bailey Speaks at 11:00 (GMT+3);
• – Eurozone Industrial Production (m/m) at 12:00 (GMT+3);
• – US FOMC Member Harker Speaks at 16:00 (GMT+3);
• – Eurozone ECB President Lagarde Speaks (m/m) at 16:00 (GMT+3);
• – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3).

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.