Investors looking for hints of Fed’s next monetary steps, with inflation data sure to be key
After the Fed took the first step towards the normalization of monetary policies, investors are looking for hints about when interest rates might be raised, and US inflation data due out Wednesday will be key for this.
After the recent rise in oil prices and the rapid rise in ex-factory (goods sold from the factory) prices in China, today’s data – including continued higher inflation is expected to raise pressure on policymakers to boost interest rates.
But weak inflation data may be insufficient to change the Fed’s monetary policy path in an environment where supply problems and rising commodity prices continue.
Before these developments, the producer price index (PPI), announced yesterday in the US, followed a course in line with market expectations, up 0.6% monthly and 8.6% annually.
In an environment where supply problems continue, a sales-heavy trend was observed in the New York stock market yesterday as producer prices pointed to the highest level in approximately 11 years on an annual basis, feeding concerns about inflation.
The Dow Jones index fell 0.31%, the S&P 500 fell 0.35%, and the Nasdaq lost 0.60%. Shares of US electric carmaker Tesla tumbled 12% yesterday after CEO Elon Musk’s survey on the sale of shares.
In European data released yesterday, the European Economic Research Center (ZEW) Economic Confidence Index rose to 31.7 points in November, up 9.4 points compared to the previous month, the first increase in six months.
In September, exports in Germany fell 0.7% on an annual basis, the second straight month of decline,while imports rose 0.1%.
On the other hand, natural gas futures contracts, which saw more than €80 ($92.6) again as concerns about gas supply in Europe flared, fell to €77 after Russian energy company Gazprom announced that it started to pump gas to five underground storage facilities in Europe for November.
On the Asian side, shares of Chinese Fantasia Holdings, whose operations were stopped on the Hong Kong stock exchange after it declared that it could not pay its due debts, fell by nearly half when the shares started to be traded again Wednesday, putting pressure on the share markets.
Inflation in China, which was 0.7% in September, reached its highest level in 13 months with 1.5% in October.
With these developments, drops of over 1% were recorded in the stock markets of China, Hong Kong, and South Korea close to the closing, while the Nikkei 225 index in Japan lost 0.5%.
On the commodity side, the barrel price of Brent oil rose 1.3% yesterday to close at $84.3, and today it moved up for the fourth trading day to $84.9.