We start this week with disappointing GDP data from China. China’s economy weakened in the third quarter, weighted by multiple headwinds from a property slump to an energy crisis. Mainland Chinese and Hong Kong equity market fell. Oil prices, meanwhile, hit new multi-year peaks, continuing their surge amid a global energy shortage. Bitcoin rallied ahead of an anticipated US exchange-traded fund approval. This week will be important for the UK markets with a number of key data releases and BoE speakers. We get UK CPI on Wednesday and Retail Sales and PMI on Friday. Dozens of companies will be reporting this week, including Tesla, Intel and Johnson & Johnson. Other data to watch will be US Beige Book and PMI data from Europe and US. US will publish Industrial Production today with a forecast of 0.3% rise in September.
US equities finished higher on Friday, adding to a rally that helped the major indices post strong advances. The moves came on the back of upbeat earnings and stronger than expected September retail sales. Import prices were lower than estimated and business inventories continued to rise. Dow Jones Industrial Averages rallied 1.1% to 35,295, S&P 500 increased 0.8% to 4,471 and Nasdaq Composite gained 0.5% to 14,897. The yield on 10-year Treasury notes rose as high as 1.5930 on Monday, heading back towards the four-month high of 1.6210 hit early last Tuesday, before slipping later in the week. Dollar has traded lower today with “kiwi” and sterling advancing after higher inflation data form New Zealand and hawkish remarks form BoE. The Dollar Index has slipped 0.6% from the last week’s 2021 high and now trading around 94.14. Fed funds futures are now fully pricing US rate hikes to begin next September as inflation pressure rises.
European stocks marked their best weekly performance in seven months on Friday, as a bright start to the earnings season helped ease investor concerns about higher inflation. The pan-European STOXX 600 index rose 0.7% to close at a one-month high, ending week with 2.6% gain after a sharp rebound in risk. This Monday European markets opened lower with DAX slipping 0.5%, CAC 40 losing 0.4% and FTSE 100 trading 0.2% lower. ECB President Christine Lagarde warned that the globalized nature of the euro area’s economy makes it highly vulnerable to systemic shocks from supply chain disruptions. Lagarde also said the current spike in inflation is unlikely to last. The focus this week will be on the UK markets. With the market already pricing in a 15bps hike by year-end and another 25 bps hikes by February and just two weeks to BoE meeting, the comments from BoE officials, CPI, Retail Sales and PMI data due this week will be closely watched. EUR is trading lower at 1.1587 against the Dollar and Pound is higher at 1.3731.
Chinese and Hong Kong equity markets fell on Monday after data showed China’s economy grew more slowly than expected in the third quarter. China’s GDP grew 4.9% in July-September from a year earlier, the weakest pace since the third quarter of 2020, as China battled Covid-10 outbreaks, property sector crash and power shortages. Chinese blue chips were down 1.53% and Hong Kong shares lost 0.56%. MSCI’s broadest Index of Asia-Pacific shares outside of Japan slipped 0.2%, while Japan’s Nikkei lost 0.3%. New Zealand reported its biggest quarterly jump in consumer prices in a decade this Monday. The data lifted kiwi by 0.3% to a one-month high of 0.7105. The surprise leap in prices in New Zealand would reinforce the need for the Reserve Bank to stay on course on its hiking trajectory.
Oil prices hit their highest level in years this Monday with Brent Crude rising 1.1% to $85.76 a barrel after hitting a session-high of $86.04, the highest price since October 2018. WTI crude futures climbed 1.5% to $83.51 a barrel, after hitting $83.73, highest since October 2014. Both WTI and Brent rose by at least 3% last week. Oil demand is recovering from the Covid-19 pandemic, boosted by the fact that power generators are switching form expensive gas and coal to fuel oil and diesel. Cold temperatures in the Northern hemisphere are also helping to worsen oil supply deficit and contribute to rising prices.