Futures in the United States and Europe are trading mildly lower today. Stock traders welcoming the view that a near-term withdrawal of quantitative easing reflects officials’ confidence in sustainable economic recovery from the coronavirus outbreak but there is still some hesitancy among a few of them. Overall, investors are confident about economic growth, they believe that any spike in coronavirus infections and supply chain restrictions will likely be temporary. Furthermore, central banks have vowed to maintain a gradual tapering pace. As a result, stocks associated with economic recovery, such as energy and financials, went up in value yesterday.
As for today, investors will be dissecting Fed Chair, Jerome Powell’s speech today for additional signals about the Fed’s monetary policy move, as well as the German IFO Business Climate will also be a focal point for European markets.
The major indexes have erased earlier losses and are on course for a positive week. In yesterday’s session, the Dow Jones Industrial Average jumped 1.48%, and the S&P 500 index hopped 1.21%. The Nasdaq, the tech-savvy index, surged 1.04%, and the Russell 2000, the small-cap index, rose 1.82%.
Bank of England
Despite lowering growth estimates for the third quarter of 2021, the Bank of England (BOE) maintained its monetary policy unaltered yesterday. Interest rates were held constant at a record low of 0.1%, and the central bank will continue its $1.2 trillion asset-buying programme. The central bank reduced its GDP projection for the third quarter from 2.9% in its August report, to 2.1% in its September report.
Investors should note that although the monetary policy has not been changed, monetary tightening seems to be on the horizon. This is because of higher-than-expected inflation, which the BOE has warned will go above 4% this year. The expected inflation is two times the targeted level. The rise in inflation is mostly because of an uncontrolled rise in energy prices. However, officials have labelled these issues as transitory and reaffirmed investors that the figure will likely drop to BOE’s 2% target in the medium term.
The unexpected dip in economic growth and rise in consumer prices have prompted policymakers to contemplate raising interest rates early in 2021, and according to Bank of America, the policy rate may be raised as early as February if inflationary pressures prevail. Having said that, the BOE will continue to closely monitor England’s macroeconomic environment, with a particular focus on the coronavirus situation and the endurance of supply-side problems such as rising energy costs.
Twitter CEO Jack Dorsey is a big fan of cryptocurrencies and frequently discusses Bitcoin on his social media accounts in an attempt to persuade and educate his followers about the technology. He believes in the concept of transferring power from the few to the many. In other words, he believes strongly in the concept of decentralisation. The Bluesky project at the company is working on incorporating decentralised features into social media applications.
The social media goliath is also working on methods to authenticate nonfungible tokens (NFTs). These are essentially digital collections of items such as high-end art. For now, any user can display NFTs on their social media accounts, but there is no way to ensure that these users actually own the digital assets. NFTs have recently exploded in popularity and are an essential component of the decentralised vision. According to reports, NFT sales reached nearly $260 million on August 28.
Oil prices have been rising in recent days due to a growing demand-supply imbalance. Oil supply has been unable to keep up with rising demand due to disruptions caused by storms in the Gulf of Mexico. As a result, crude oil inventories in the United States continue to decline.
The production of crude oil is still below 900,000 barrels per day, as it was before Hurricane Ida roared through the Gulf of Mexico. Furthermore, OPEC+ has also not been able to provide some support to prices as it is struggling to supplement output because of delays to maintenance and under investment after the coronavirus pandemic began. However, Iraq’s oil minister said that the cartel is targeting keeping crude oil near $70 per barrel. Similarly, if natural gas is replaced with oil to meet the need for higher power output in Europe this winter, demand for oil is likely to rise.
Yesterday, gold recovered some of its losses after the US dollar fell from its one-month high. Investors are now assessing the Fed’s remarks that the unprecedented stimulus provided to assist markets during the coronavirus pandemic is about to be phased off. However, the absence of specifics regarding the probable timeline, scale, and pace of tapering kept the precious metal from plunging any further. Moving forward, investors should understand that, unless anything noteworthy happens to the dollar index, gold prices will likely be influenced more by investors’ risk appetite.
For this week, the Evergrande issue is all that anyone can talk about. Beijing is encouraging the real estate giant to do all that is possible to avoid a default on its dollar bonds while focusing on finishing work-in-progress projects. Regulators, on the other hand, are not interested in bailing out the company unless it fails to meet its obligations. As of 11.50 p.m. EST, the Nikkei jumped 2.02%, while the Shanghai Composite Index dropped 0.07%. Seoul’s Kospi declined 0.02%. The ASX 200 index fell 0.41%, and the Hang Seng index, in Hong Kong, dipped 0.07%.