American and European futures are down today, following the end of an extremely volatile month for stock markets. Currently, investors are concerned about a possible rebound of coronavirus cases, the debt ceiling dispute, and uncertainty about the Chinese macroeconomic landscape. The issue that stock traders will face in October is determining how to classify various problems that will come their way. Specifically, determining whether the concerns have a structural impact on the economy or whether such factors are likely to affect short-term volatility, which they can leverage.
In the United States, investors will be inspecting today’s core PCE price index, which measures price movement for goods and services used solely by individuals. Similarly, PMI data for the United States and Germany will be released today. The information provided will assist investors in understanding how companies see economic activity shaping up in the short term.
In yesterday’s session, the Dow Jones Industrial Average fell 1.59%, and the S&P 500 index declined 1.19%. The Nasdaq, the tech-savvy index, dipped 0.44%, and the Russell 2000, the small-cap index, dropped 0.94%.
September lived up to its reputation as an exceptionally unpredictable month. The Dow Jones Industrial Average and Nasdaq fell 4.3% and 5.3%, respectively, while the S&P 500 fell 4.8%. The Dow and Nasdaq had their worst performing months in 2021, while the S&P 500 ended its seven-month winning streak. The energy sector was the best performer last month, rising about 9%, while the materials sector suffered the greatest losses, falling nearly 7.4% on a month-to-month basis. Moving onwards, the economy, not just in the U.S. but globally as well, is likely to remain fickle.
Yesterday, the government was able to postpone the US Treasury’s default by convincing the House and Senate to pass a short-term appropriations bill that would allow the Biden administration to operate until December 3rd. President Joe Biden’s proposed spending plan has caused a schism between the two major political parties in the United States. Democratic Senator Joe Manchin wants the spending plan slashed to $1.5 trillion, nearly half of what the government proposed. Similarly, House Speaker Nancy Pelosi moved forward by putting the bipartisan infrastructure bill to a vote. However, Democrats have vowed to impede it until the Senate concurs on a more comprehensive spending and tax plan.
Stock traders will be digesting today’s core personal consumption expenditures price index to understand the state of inflation. This metric is important because it is what the Federal Reserve uses to tone down its monetary policy. The figure is expected to jump 3.5% on a year over year basis, and grow 0.2% in August. The consumer price measure hit its highest mark since May 1991 in July.
Investors should understand that the global power crisis is likely to have an impact on consumer prices as well. Fuel and heating product prices are likely to rise as a result. The Chinese government has already asked the country’s top energy firms to increase supplies ahead of the winter season one way or another. Similarly, power, and natural gas prices in Europe have skyrocketed, indicating that the power crisis will only worsen as the weather turns colder. The power issue is likely to thwart the UN’s efforts to eliminate or at least reduce coal consumption.
The government in the United Kingdom, on the other hand, is taking a different approach. At a time when rising consumer prices are a major concern for both consumers and investors, they are proceeding with the implementation of a green energy surcharge on gas bills. This surcharge is already being applied to electricity bills. The government’s policy is in line with its net zero initiative and will be phased out over a ten-year period. Officials have promised that, while gas prices rise, the cost of combined energy bills for consumers will stay the same. The policy’s goal is to force consumers to use electronic alternatives to gas products, such as electric vehicles, in order to reduce the country’s carbon footprint.
The head of the Federal Reserve, Jerome Powell, expressed his stance on stablecoin regulation. His prior remarks caused a stir in the crypto markets, as he was reported to have said that stablecoins should be made illegal. That is not the case, however. According to his testimony before the House Financial Services Committee, central banks’ own digital money would most likely replace stablecoins because it would perform the same function. He did, however, confirm the need for some kind of regulation on such digital assets. Stablecoins are similar to bank deposits and money market funds in this regard. As a result, just as they are protected under other financial products, consumers will need some kind of protection against fraudulent activities while using stablecoins as well.
Even as crude oil inventories increased and the US dollar fell in value, oil prices remained stable. The most likely reason for stable oil prices is that investors believe the supply-demand gap will widen as the power crisis worsens. According to Citigroup, oil supplies are expected to be 1.5 million barrels per day short over the next two quarters. As of 11.42 p.m. EST, Brent crude is trading at $78.04 per barrel while WTI crude is trading at $74.80 per barrel.
Yesterday’s unemployment claims data came in lower than expected. According to data, 362,000 claims were filed last week, a boost of 27,000 from the previous week. The anticipated number was 335,000. As a result, the dollar index fell, and gold prices increased by nearly 2%. Investors should keep in mind, however, that expectations that the Fed will soon begin winding down quantitative easing are acting as a barrier to any kind of upward movement for the precious metal.
The official manufacturing PMI in China showed that the nation’s manufacturing activity fell in September due to higher input costs and power supply constraints. The US Service, on the other hand, has returned to pre-pandemic levels due to a significant reduction in coronavirus cases. In August, the PMI index was 50.1, and it is now 49.6 in September. The anticipated figure was 50.1.
As of 12.47 a.m. EST, the Nikkei dropped 2.49%, and the Shanghai Composite Index surged 0.90%. Seoul’s Kospi dropped 1.47%. The ASX 200 index dipped 1.98%, and the Hang Seng index, in Hong Kong, fell 0.36%.