September CPI moderated from 8.3% to 8.2%, lower than expected
Pure mirage. The gains of more than 1% recorded by some European exchanges mid-session turned into reds after the release of the September CPI in the US. It is true that inflation fell from 8.3% to 8.2% over the period. But this decline was less than expected by consensus, which pointed to a decline to 8.1%. In addition, underlying interest rates continue to rise, from 6.3% to 6.6%, above the 6.5% expected by the market.
Translation. The fight against inflation is having slow results and will take longer than expected. And this data, along with good labor market data released last week, is giving the Federal Reserve (Fed) a free hand to raise interest rates further. And pushing even harder, even if that implies a recession and greater pressure on other central banks, which may not have the same slowdown in the pace of stimulus withdrawals.
Against this background, the Ibex-35 went from 0.5% gains to 0.8%. And the losses could be even greater, with futures falling more than 2% on Wall Street and more than 1% on major European markets.
The selection is based on the boost from IAG, shot up almost 10%, after reporting that the company was better than expected in the third quarter, anticipating an operating profit before exceptional items of around 1,200 million euros, although we will have to wait until October 28 to know more details with the presentation of their quarterly accounts.
The pessimism in the market is clear. Even amid recent declines that have left many stocks attractively priced for investors who are still hesitant to increase their risk exposure. At least until other references are known that, while insignificant in central bank decision-making, could trigger purchases in some publicly traded companies.
This is the case at the start of corporate earnings season, where Wall Street’s big banks will appear this Friday. Bankinter analysts expect a 2.7% increase in earnings per share for publicly traded S&P 500 companies in the third quarter, compared to 8% in the previous quarter. But the key will again lie in the forecasts that the company’s directors make for the last part of the year.
In anticipation of this new reference, investors are also closely monitoring the evolution of the bond market, following the tensions of recent days in the UK market, and waiting to see if the Bank of England (BoE) will finally end its bond buying program on Friday, as planned, or extend it to avoid further turbulence.
This situation has weighed heavily on the rest of European government bonds, where yields (which move inversely with price) have been rising in positions for days. However, this Thursday they pulled positions with the 10-year German bond yield, the main benchmark in Europe, with 2.27%.
In the commodities market, the oil price resumed its rise with a barrel of the Brent rate, the benchmark in Europe, which trades at $92.94, while the price in West Texas stood at $87.66.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
