Global inflation will peak in the IV quarter of 2021

November 19, 2021

The US stock indices were traded yesterday without a single trend. The Dow Jones index decreased by 0.17% by the stock exchange close, the S&P 500 index increased by 0.34%, and the technology Nasdaq added 0.45%. The number of jobless claims in the US fell by 1,000 to 268,000 last week. This has been the lowest number since March 2020. According to S&P analysts, global inflation will peak in the fourth quarter of 2021. All investor attention is now focused on when central banks will start raising interest rates in response to rising inflation.

Nvidia Corp’s stock price increased by 8.3% yesterday. The graphics processor maker finished the third quarter of its fiscal year with record revenue. Shares of Macy’s Inc added 21.2%. The American department store chain posted a profitable third quarter of 2021, with adjusted earnings well above analysts’ forecasts.

European stock indexes closed in the red zone yesterday. The Stoxx Europe 600 composite index of the region’s largest companies decreased by 0.46% by the close of trading. British FTSE 100 decreased by 0.5%, German DAX lost 0.18%, French CAC 40 decreased by 0.21%, Italian FTSE MIB decreased by 0.59%, Spanish IBEX 35 lost 1%. Investors remain concerned about rising consumer prices in the region. Given that the ECB has no plans to cut stimulus measures soon, inflation in the region could rise even higher, which negatively affects national currencies.

Turkey’s central bank is cutting its key interest rate for the third consecutive month. The cut led to further declines in real yields as consumer inflation rose to an annualized 19.9% in October. This year, the Turkish lira has weakened nearly 30% against the dollar and more than 15% this quarter alone, the worst of any major currency. President Recep Tayyip Erdogan has made it clearer that he wants lower interest rates. Turkey’s central bank is meeting his demands at the expense of currency and price stability.

Oil has increased its losses in recent days due to the prospect of using strategic reserves by the US and other countries. China has said it was working on releasing some crude oil from its reserves. But the negative effect on oil is unlikely to be long-term.

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Gold prices have recently stabilized slightly. Analysts’ opinions on gold are very different. On the one hand, investors habitually buy the “yellow metal” to hedge against inflation. On the other hand, tighter monetary policy leads to higher government bond yields, which negatively impacts gold prices.

Asia-Pacific stock indices were mostly increasing on Friday. Japan’s Nikkei 225 index gained 0.5% amid expectations that Prime Minister Fumio Kishida will soon introduce a new stimulus package. It includes measures to mitigate the negative economic impact of rising energy prices. The Chinese Shanghai Composite added 1.13% today, South Korean KOSPI gained 0.8%, and the Australian S&P/ASX 200 added 0.23%. The growth of the Chinese market is supported by the rise in shares of consumer sector companies and the “green energy” sector. But Hong Kong Hang Seng index decreased by 1.22% amid the sell-off of technology stocks.

Alibaba Group posted a net income of CN¥46.212 billion, down 36.7% from CN¥72.961 billion as compared to the previous year.

China Evergrande Group plans to sell its entire stake in HengTen Networks Group Ltd. with a huge loss. The threat of default still hangs over the major developer.

Most analysts are inclined to believe that the Reserve Bank of New Zealand will start to tighten its monetary policy at its meeting next week. Analysts expect a 50 basis points (bps) interest rate hike.

Main market quotes:

S&P 500 (F) 4,704.54 +15.87 (+0.34%)

Dow Jones 35,870.95 −60.10 (−0.17%)

DAX 16,221.73 −29.40 (−0.18%)

FTSE 100 7,255.96 −35.24 (−0.48%)

USD Index 95.54 −0.29 (−0.30%)

Important events for today:

– Japan National Core Consumer Price Index (m/m) at 01:30 (GMT+2);
– UK Retail Sales (m/m) at 09:00 (GMT+2);
– ECB President Christine Lagarde’s Speech at 10:00 (GMT+2);
– Canada Retail Sales (m/m) at 15:30 (GMT+2);
– UUS FOMC Member Waller speaks at 17:45 (GMT+2);
– US FOMC Member Clarida speaks at 19:15 (GMT+2);
– ECB President Christine Lagarde’s Speech at 22:00 (GMT+2).

by JustForex

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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Global inflation will peak in the IV quarter of 2021