Inflation and Debt Ceiling Concerns Nudge Stocks and Dollar Lower

October 4, 2021

Equity markets closed down 2.2% in Hong Kong, 1.1% in Japan, 1.6% in South Korea and 1.0% in Taiwan. China was closed for a National Holiday and will remain so through Thursday. The German Dax is unchanged, and while some other European bourses show marginal rises, U.S. stock futures are off around 0.4%.

The dollar softened by 0.3% overnight against the euro, kiwi and British pound and by 0.2% relative to the loonie, Aussie dollar and weighted DXY index. An exception to this pattern has been a 0.2% dollar uptick versus the Japanese yen.

Ten-year sovereign debt yields are up three basis points in the United States and two bps in Germany and Great Britain. There’s been scant change in the price of WTI oil and a 0.6% fall in the price of gold.

Like many Mondays, data flow has been light today. The Biden administration’s twin fiscal bills remain bogged down in the House of Representative, and no move has occurred to raised the debt ceiling, which needs to happen by October 18. Failing that approval, a U.S. recession would become a clear and present danger.

Rising global inflation is another big concern. Turkish consumer prices jumped 1.3% on month in September and to a 30-month high of 19.6% in the 12-month rate of change. Turkish producer prices leaped 1.55% last month and to a year-on-year increase of 43.96%, most since October 2018.

Swiss CPI inflation, which had swung from -0.8% last December to a 33-month high of 0.9% in August, remained at that near three-year high in September.

Investor confidence in the euro area economy fell to a six-month low in October according to the Sentix monthly measure.

On-year growth in Japan’s monetary base slowed to a 13-month low of 11.7% in September from 14.9% in August and 20.9% in the first half of 2021. The MB is what Bank of Japan monetary policy influences most directly.

The global manufacturing purchasing managers index in September remained stuck at August’s six-month low.

An OPEC meeting is scheduled today, and U.S. factory orders data will be released this morning. Tomorrow sees the release of many service sector purchasing managers surveys and the results of this month’s central bank meetings in Australia and Romania.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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