Statements by Federal Reserve Chairman Jerome Powell indicate that the Fed could push to curb its securities purchases (tapering) if inflation does prove more sustainable than previously thought. According to Powell, the Fed will discuss this at its next meeting on December 15.
Together with the increased concerns regarding the dangerousness of the new coronavirus variant Omicron, Powell's statement weighed heavily on the stock market sentiment on Tuesday. The Dow Jones Industrial fell again sharply by -1.86% to 34'483.72 points and the broad S&P 500 fell by -1.9% to 4'567.00 points. On the Nasdaq, the technology indices lost about -1.6%. In the bond market, US government bond yields rose and supported the US dollar.
In Asia, equity indices were able to recover somewhat in some cases, but uncertainty about the potential impact of the Omicron variant and inflation, which is now also increasingly causing concern among central banks, remain the major factors of uncertainty. In China, the Purchasing Managers' Index (PMI) of the Chinese business magazine “Caixin” also signaled weaker activity in the industrial sector. The PMI fell from 50.6 to 49.9 points in November.
Fed Chairman Jerome Powell sees risks to the economic recovery and increased uncertainty about inflation trends from the coronavirus variant Omicron. The financial markets are already speculating whether the Fed could now reconsider the already announced throttling of bond purchases, the so-called tapering. Powell will testify before the US Senate Banking Committee today.
In the 19-euro countries, the inflation rate of consumer prices in November rose on average to +4.9%. This was stronger than expected and the highest level since the beginning of the currency area. In October, the inflation rate had still been +4.1% and the consensus forecast for November was +4.5%. The strongest driver remains energy prices, which increased by +27.4% over the year according to Eurostat. The core rate, which is considered by economists to be a more reliable inflation measure, also climbed much more strongly than anticipated from +2.0% in October to +2.6% last month. The consensus was +2.3%.
The cost of living also rose noticeably in France and Italy. In France, inflationary pressure has intensified further. In November, consumer prices rose more strongly than expected by +3.4% compared with the same period a year earlier (consensus +3.2%). With the fourth consecutive increase, France's inflation rate reached its highest level since 2008. In Italy, inflation jumped to +4% (consensus +3.3%) – also the highest rate since 2008.
France's gross domestic product (GDP) grew strongly by +3% quarter-on-quarter in July-September. In Q2, the second largest economy in the eurozone managed a growth rate of +1.3%. Italy's GDP also expanded by a solid +2.6% in the summer months, albeit at a slightly slower pace than in Q2.
|08:00||GE||Retail Sales (October, m/m)||-2.5%|
|08:30||SZ||Consumer Prices (November, y/y)||+1.2%|
|09:15||ESP||IHS Markit PMI Manufacturing (November)||57.4|
|09:30||SZ||PMI Manufacturing (November)||65.4|
|09:45||IT||IHS Markit PMI Manufacturing (November)||61.1|
|09:50||FR||IHS Markit PMI Manufacturing (November)||54.6|
|09:55||GE||IHS Markit PMI Manufacturing (November)||57.6|
|10:00||EZ||IHS Markit PMI Manufacturing (November)||58.6|
|10:30||UK||IHS Markit PMI Manufacturing (November)||58.2|
|14:15||US||ADP Employment Growth (November)||571,000|
|15:00||UK||BoE Governor Bailey Speech|
|15:45||US||IHS Markit PMI Manufacturing (November)||59.1|
|16:00||US||ISM PMI Manufacturing (November)||60.8|
|16:00||US||US Treasury Secretary Yellen Speech|
|20:00||US||Fed Beige Book|
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Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: email@example.com
Source: LGT Bank (Switzerland) Ltd.
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