The week starting seems to indicate that despite the weaker data reading from the US labor market, investors are still expecting tapering this year and rate hikes in 2022. We can look for further information in the report of the latest Federal Reserve meeting.
Investors around the world will be waiting for Wednesday's FOMC "minutes" to see how much progress the Fed sees in the US economy and labor market. Further clues about the tapering date may also be expected. At its September meeting, the Federal Reserve said that if progress toward employment and inflation continues as expected, a modest reduction in the pace of asset purchases may soon be warranted, and interest rate hikes may come sooner than expected.
Wall Street earnings season and data from the U.S. and Europe
Wall Street's earnings season is also kicking off, which, in addition to monetary policy news, could be crucial for stock market indices. Major banks including JPMorgan Chase, Goldman Sachs, Bank of America, Wells Fargo, Citigroup and Morgan Stanley will report third quarter results.
From a U.S. data standpoint, it's not over yet. The Consumer Price Report for September will be released this week. It is likely to show that inflation has rebounded to 5.4 percent, the 13-year high reached in July this year, while retail sales will decline slightly. In contrast, Michigan's preliminary estimate of consumer sentiment for October is likely to show a slight improvement, as the index previously fell to its lowest level in a decade, according to a summary at tradingeconomics.
In Europe, on the other hand, investors may be watching industrial production and foreign trade data in the eurozone. Eurozone industrial activity likely contracted in August, erasing all the progress made in July. Meanwhile, Germany's ZEW economic sentiment survey for October is expected to show that investor morale fell for the fifth consecutive month, remaining at its lowest level since the pandemic-induced decline in March 2020. - reports tradingeconomics.
Oil still rising
Crude oil rose to near a seven-year high above $80 a barrel, extending multi-week gains. WTI crude gained more than 5 percent last week, marking the seventh straight week of gains and the longest streak since December 2013. The oil market appears to be driven by substitution effects in the face of rising natural gas prices and OPEC+'s decision early last week to maintain a planned 400,000 barrels per day increase in oil production for November, despite pressure from some countries, including the U.S. and India, to increase supply to stabilize prices.
The U.S. Department of Energy has communicated that it has no current plans to tap domestic oil reserves. On Wednesday, a report surfaced suggesting it may be considering such an option to curb rising prices.
Daniel Kostecki, Conotoxia Ltd.
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