Tuesday, October 26

Stocks head into stormy October, dollar defies ugly mood


Article content

LONDON — European stocks sank to two-month lows on Friday after slides in Asia and on Wall Street, with euro zone inflation data expected to hit a 13-year high to compound investor fears over surging prices combining with stuttering growth.

On the first day of October, the month for some of history’s most infamous market routs, the STOXX index of 600 companies fell 0.9%, hitting its weakest level since mid-July.

The MSCI’s gauge of stocks across the globe shed 0.4%, with US stock futures pointing to further falls.

Advertisement

Article content

With stellar economic growth figures now in the rear view mirror, markets were looking ugly going into October, Michael Hewson, chief markets analyst at CMC Markets, said.

Data overnight showed that Asia’s manufacturing activity broadly stagnated in September as signs of slowing Chinese growth weighed on the region’s economies.

“There is a sense that with October’s reputation, worries about surging energy prices, supply chain disruptions, concerns about inflation and power shortages, October could be a fairly windy affair,” Hewson said.

Flash estimates of headline euro zone inflation are due at 0900 GMT, with UniCredit expecting a year-on-year rise to 3.3%, which would be its highest level since 2008.

Advertisement

Article content

“We expect headline inflation to peak in November at close to 4%,” UniCredit analysts said in a note.

DOLLAR DEFIES MOOD

US stock futures pointed to a 0.60% decline for the S&P 500, following a 1.19% drop in the index overnight that punctuated its worst month since March of last year.

The dollar, however, began the last quarter of 2021 near its highest levels of the year, and heading for its best week since June as currency markets braced for US interest rates to rise before those of major peers.

The dollar index, which measures the currency against six major rivals, was off Thursday’s one-year high of 94.504, last changing hands at 94.287. Meanwhile, the benchmark 10-year US Treasury yield was at 1.5013%.

In Asia, Japan’s Nikkei tumbled 2.3% to the lowest level since Sept. 3. An MSCI index of Asia-Pacific stocks slid 1.22% to its lowest since Aug. 24.

Advertisement

Article content

Chinese markets are closed for a week from Friday for the Golden Week holiday.

The debate over whether rising inflation mixed with patchier growth was a recipe for stagflation continued.

“You can argue whether it’s really stagflation or not, but the whole growth-inflation backdrop seems to have just tilted to a less favorable one,” said Rob Carnell, Asia-Pacific head of research at ING in Singapore.

Federal Reserve Chair Jerome Powell said on Wednesday that resolving “tension” between high inflation and high unemployment is the Fed’s most urgent issue, acknowledging a potential conflict between the US central bank’s two goals of stable prices and full employment.

The latest clues on the Fed’s policy normalization path come with US personal spending and core consumption deflator data later in the day.

Crude prices continued to ease after Brent topped $80 a barrel earlier in the week for the first time in three years.

Brent crude futures slipped 0.5% from Thursday to $77.92, while US crude futures fell 0.6% to $74.57.

Gold, despite being traditionally an inflation hedge and safe haven, eased 0.26% to $1,752 an ounce, following Thursday’s 1.77% surge, the biggest since March.

(Reporting by Kevin Buckland; Editing by Lincoln Feast and Alexander Smith)

Advertisement

In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

    Comments

    Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.



    financialpost.com

    Leave a Reply

    Your email address will not be published. Required fields are marked *