Market Drivers – U. S. Session 14-10-2021

Mohamed Abdelhamid 15 October, 2021 3:46 am Commodities, Forex Market, Global Stock Market, Market Update

Once again, on Thursday, inflation related concerns were steering investors’ decisions on picking safe haven assets away from interest bearing investments.

Speaking to a virtual gathering of the Euro50 Group on Thursday, St. Louis Fed President James Bullard described the inflation trend as “concerning.”

U.S. shares surged Thursday reacting to banks’ strong quarterly results. Dow Jones rose 533 points, or 1.55%, while the S&P 500 index advanced 1.71% to post its best day since March and the Nasdaq Composite index tacked on 1.73% for its best session since May.

Investors still digest a lighter-than-expected September producer inflation reading. The yield on the benchmark 10-year Treasury note gave up 3 basis points, falling to 1.519% at 2:35 p.m. ET. The yield on the 30-year Treasury bond was 1.8 basis points lower at 2.023%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

China’s factory gate prices grew at the fastest pace in almost 26 years in September, adding to global inflation risks, and that was good news for gold prices.

Economic Data
U. S. final demand for energy in September rose 2.8 percent; which accounted for a full 40 percent of the broad-based advance in producer prices. On a more rough level, prices of gasoline rose 3.9 percent last month.

The CRB commodity index hit an all-time high, PPI Thursday was at the highest in at least 10 years and yet yields are falling.

The U.S. government reported on Thursday that producer prices rose 8.6% in the 12 months through September, the biggest year-on-year advance in nearly 11 years.

Data on Wednesday showed U.S. consumer prices rose 5.4%. But data from both reports also suggested COVID-driven price increases may already have peaked, with month-to-month gains slowing.

The PPI data wasn’t as high as feared, especially excluding food and energy. So companies might not be quite as eager to pass along higher costs.

Crude oil prices slid lower Thursday after the Energy Information Administration reported a crude oil inventory build of 6.1 million barrels for the week to October 8.

Gasoline inventory builds have also failed to put a lid on prices at the pump in the past couple of weeks. For last week, the EIA estimated a 2-million-barrel draw in gasoline stocks. This compared with a combined build of 3.5 million barrels for the two prior weeks.

Some Fed speakers such as James Bullard said that there is no strong case that inflationary pressures will dissipate over the next six months.

Using the same tone, the Atlanta Fed’s Bostic said that inflation appears to last longer attributed to supply chains and labor disruptions.

The US Initial Jobless Claims decreased to 293K better than the anticipated 319K, increasing the chances of a Fed’s bond taper announcement in the November meeting.
The US Producer Price Index (PPI) rose by 8.6%, lower than the 8.7% estimated, while the PPI excluding food and energy increased by 6.8%, lower than the 7.1%.

Other Developments

Strong gains came as jobless claims fell to the lowest level since the outbreak of COVID-19. A separate release showed producer prices rose 8.6% year over year in September while prices edged up 0.5% month over month.

Representatives of five member states met European Commission vice-president Maros Sefcovic, this week, to demand contingency plans for a likely trade war. This could deeply impact the GBP’s performance.

Moreover, the British pound had a boost over the weekend when Bank of England’s members expressed their interest in tackling rising inflation by hiking interest rates.

The U. S. Retail Sales and the University of Michigan Consumer Sentiment Index will be revealed on Friday.

Investors expect a decrease of 0.2% in Retail Sales for September, whereas the UoM Consumer Sentiment Index for October estimates around 73.1 better than the September 72.8.

On Friday, the Japanese economic docket will feature the Tertiary Industry Index for August on a monthly basis is expected at 0%.
The most important headlines on Thursday included the following: