Most Asian stocks fell Wednesday as the dollar held around a one-year high, bolstered by robust U.S. economic data that highlighted the case for tighter monetary policy and pushed up Treasury yields. The S&P 500 extended a rally overnight on expanding retail sales and solid reports from the likes of Home Depot Inc. that supported confidence in the U.S. outlook. Treasuries held losses, with the 10-year yield above 1.6%. Traders are waiting to see the strength of demand at a 20-year auction Wednesday. Focus turns to U.S. housing which starts today, the Conference Board U.S. leading index and Initial Jobless Claims which are both due Thursday. The S&P 500 rose 0.39% to close 4,700.90, NASDAQ rose 0.76% to close at 15,973.86 while the DOW JONES rose 0.15% to close at 36,142.22.
European stock markets were expected to open lower Wednesday after disappointing Japanese trade data, while a U.K. inflation release pointed to a Bank of England rate hike in December. The DAX futures contract in Germany as at 11:12(GMT) was up 0.08%, CAC 40 futures in France was also up 0.03% and the FTSE 100 futures contract in the U.K. was down 0.15%. U.K. consumer prices rose 4.2% on the year in October, data showed earlier Wednesday which represents a sharp jump from 3.1% the previous month and is more than double the central bank’s medium-term target of 2%. Following on from Tuesday’s strong employment data, this release may well provoke an interest rate hike from the Bank of England next month. The equivalent inflation data from the Eurozone is due later in the session today, but the European Central Bank has guided towards a more patient stance in terms of rate hikes.
Crude prices continues to weaken as investors weighed the odds that the Biden administration will tap emergency reserves in a coordinated move with nations such as China, and a mixed report on U.S. stockpiles. This saw West Texas Intermediate decline 1%, while the Brent contract fell 0.6% to $81.93/bbl after easing on Tuesday as President Joe Biden has been looking at the merits of drawing oil from the Strategic Petroleum Reserve to quell gasoline prices. The industry-funded American Petroleum Institute reported nationwide crude inventories rose 655,000 barrels last week, according to people familiar with the data. After hitting a seven-year high last month crude has eased, and traders are trying to figure out the market’s likely trajectory into 2022. The International Energy Agency said this week while demand growth remains robust, supply is catching up. Meanwhile, the Organization of Petroleum Exporting Countries said a surplus may soon emerge as the rebound from the pandemic falters.
Ghanaian Finance Minister Ken Ofori-Atta will look to allay investor concerns about the nation’s debt sustainability and sluggish economic growth in his budget speech today. Investors are concerned about Ghana’s ability to service its loans with the average extra premium sought on dollar securities sold by the government now close to distressed levels. The general government interest expense is projected by Fitch Ratings to increase to almost 47% of revenue next year, well above the median of 11% for nations with a similar investment grade. Ghana faces a major challenge in collecting revenue, something it’s trying to address with a digitized system. The nation’s tax-to-GDP ratio is forecast at 12.9% this year, compared with 24% in a peer country such as South Africa for 2021-22 and 40% among high-income nations. The budget will need to outline measures to change this. Ofori-Atta may announce a review of the government’s 3% tax on gold exports. Since its introduction in May last year, the levy has spurred an increase in gold smuggling from small mines, which extract a third of output in Africa’s biggest producer of the metal.