This week, central banks will again be at the center of events on the capital markets. Investors will be eagerly awaiting the monetary policy decision of the Federal Reserve (Fed) on Wednesday. The Fed could then give the starting signal for the anticipated tapering, i.e. the curbing of quantitative measures, or government bond purchases. The Bank of England will follow on Thursday. It cannot be ruled out that the British central bank will already initiate the turnaround in monetary policy with a first rate hike.
On the New York Stock Exchange, the indices went into the weekend with gains despite disappointing quarterly reports from Apple and Amazon. The Dow Jones Industrial gained +0.25% to 35'819.56 points on Friday, closing October with a monthly performance of +5.8%. The S&P 500 ended Friday's trading +0.19% higher at 4'605.38 points. On the Nasdaq technology exchange, initial profit-taking was put away and daily gains of about half a percent were taken into the weekend. In October, the Nasdaq 100 shows a monthly performance of just under +8%.
In Tokyo, the 225-stock Nikkei index gained about +2.6% after the ruling party (Liberal Democratic Party, LDP) secured the election victory.
The G20 summit in Rome was supposed to launch the global climate conference in Glasgow, Scotland, but dashed hopes. The 20 leading economic powers, responsible for 80% of greenhouse gases, failed to agree on common and ambitious climate targets, and the final declaration contains no concrete target date, either for carbon neutrality or for phasing out coal-fired power generation. The G20 merely reaffirmed that they remained committed to the goals of the Paris Agreement. However, the G20 did reach an agreement on a global minimum tax for companies. Large, internationally active companies are to pay at least 15% tax by 2023 at the latest, regardless of where they are based.
Japan reported positive annual inflation for the first time in 13 months. In September, consumer prices rose +0.2% year-on-year. With the Bank of Japan anchoring ten-year government bond yields at zero percent, rising inflation could depress real interest rates and weigh on the yen.
The Fed's preferred consumption focused PCE (Personal Consumption Expanditure Price Index) inflation indicator climbed to +4.4% in September, from 4.2% in August, reflecting the strong rise in overall consumer price inflation, which reached +5.4% in September. Like the ECB, however, the Fed expects the high inflationary pressure to be temporary and to “return to normal” over the course of the next year.
At +4.1%, the annual inflation rate in the eurozone countries reached its highest level since mid-2008 in October, thus making another strong leap compared with the previous month's +3.4%. In addition, inflationary pressure increased significantly more than analysts had expected. The consensus was “only” +3.7%. The main price driver remains energy, which rose by +23.5% over the year. The core rate, excluding energy and food prices, rose to +2.1% in October from +1.9% in September. As the European Central Bank stated only last Thursday, it continues to expect inflation to be only temporarily high.
In the eurozone, gross domestic product grew more strongly than expected in the third quarter. Compared to the previous quarter, economic output increased by +2.2%, as reported by Eurostat on Friday. The consensus was +2.1%. In the second quarter, GDP in the euro area had increased by +2.1%. In the two summer quarters, the economy benefited from the broad easing of pandemic measures in most euro countries.
The Italian economy grew significantly faster than expected in the third quarter. Compared with the previous quarter, GDP expanded by +2.6% (consensus +2.0%).
By contrast, Spain's economy grew slightly more slowly in the summer than economists had forecast. Economic output rose by +2.0% in Q3 compared with the previous quarter (consensus +2.9%).
|10:30||SZ||PMI Manufacturing (October)||52.5|
|11:30||UK||IHS Markit PMI Manufacturing (October)||57.7|
|15:45||US||IHS Markit PMI Manufacturing (October)||60.7|
|16:00||US||ISM PMI Manufacturing (October)||61.1|
|AUT||Erste Group Bank||Q3|
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Source: LGT Bank (Switzerland) Ltd.
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