Stock futures in Europe and in the US are struggling for direction following a day in which stock markets gained ground, with the S&P 500 achieving its longest winning run since 2017.Strong corporate earnings, strong payroll reports, and advancements in coronavirus treatments have boosted investor sentiment, providing support for the economy’s recovery in the coming months. As a result, investors are currently putting money into stocks that are positively related to economic growth, such as energy, travel, and raw materials.
Investors will be digesting the producer price index data, as well as the German Zew economic sentiment numbers, today. Furthermore, Fed Chair Jerome Powell and ECB President Christine Lagarde are set to speak today as well. These events can potentially cause volatility in markets.
In Monday’s session, the Dow Jones Industrial Average surged 0.29%, while the S&P 500 index jumped 0.09%. The Nasdaq, the tech-savvy index, gained 0.07%, and the Russell 2000 soared 0.23%.
The main focus of investors this week will be updates on inflation, with the producer price index set to be released today while the consumer price index is scheduled to be published tomorrow. Because of rising energy costs and supply chain constraints, inflation is likely to have surged to its highest level in thirty years. On a month-over-month basis, both the producer price and consumer price indices are projected to have jumped 0.6% in October.
Having said that, the S&P 500’s growth prospects remain strong, bolstered by strong corporate earnings in the third quarter, which increased 40% year on year. Hence, rather than worrying about rising inflation, stock traders are trying to capitalize on the market rally.
Furthermore, over the past few days, investors have been flushed with positive news, including the approval of a $550 billion infrastructure bill at a time when the Federal Reserve is going to start tapering its historical stimulus measures. This step by Washington has helped to alleviate investor fears that the curbing of quantitative easing measures, along with rapidly rising consumer prices, would likely hinder economic growth. This is because spending on infrastructure is important as it improves a country’s capacity to be more productive and bring in a positive return on investment in coming years. As a result, within the S & P 500, the industrial sector closed at record highs while the materials sector hopped 1.23%.
Moreover, Pfizer’s COVID-19 pill and the easing of travel restrictions in the United States have stirred confidence among investors that companies will continue to attain strong corporate earnings in the fourth quarter as well.
Within just a few days of Bitcoin’s last burst to historical highs, on Monday the notorious digital coin was again able to shatter through its ceiling and is currently trading around $67,700. Similarly, Ethereum breaking through the $4.800 barrier is a first for the alt coin. The recent cryptocurrency rally has been aided by the launch of a Bitcoin-linked ETF in the United States as well as Elon Musk’s weekend Twitter poll.
Solana and Binance Coin have gained nearly 20% in the last week, bringing the total market capitalization of cryptocurrencies to $3 trillion. As evidenced by Bitcoin’s price action, which is now four times what it was at the end of 2020, as investors are becoming more comfortable with the practical use of Bitcoin and companies are working hard to find innovative ways to use blockchain technology, as evidenced by the launch of new coins such as Solana.
Support for crude oil prices continues to rise because of a surge in demand fuelled by rapid economic recovery. The United States has also eased travel restrictions, which will add to the worldwide demand for jet fuel as coronavirus cases continue to decline because of widespread vaccine campaigns. Furthermore, President Biden’s newly approved infrastructure bill is also expected to push demand for oil upwards. Similarly, recent economic reports coming out of China, the second largest economy in the world, also show better than expected economic growth, supported by higher demand from the winter holiday season and improvement in supply chains. Hence, demand from Beijing is also expected to rise.
On the other hand, with rapidly rising demand, supply is expected to remain tight. Over the next few weeks, oil-producing countries are also expecting an uptick in demand because of which Saudi Arabia has raised its oil prices by $1.40 per barrel for Asian countries as well. Working to ease pressure on prices, the United States is discussing various ways to pump oil into markets, including using its Strategic Petroleum Reserve.
Gold prices climbed on Monday, supported by a decline in the dollar index and rising inflation. The dollar index fell 0.3% after the Federal Reserve announced that it will begin tapering later this month, but at a dovish pace, implying that interest rates will remain low in the short term. Hence, generally speaking, central banks around the world still seem to be accommodative, and in this case, investors are using their liquidity and excess cash to hold the precious metal to hedge against persistent inflation.
Asian Pacific Markets
SoftBank Group, a Japanese conglomerate, declared that it plans to buy back its shares worth $8.83 billion because of which its stock price jumped 10.42% on Monday. The company had a net loss of $3.5 billion in its third quarter of 2021. As of 12.53 a.m. EST, the Nikkei dropped 0.54% and the Shanghai index fell 0.02%. The Hang Seng index, in Hong Kong, dipped 0.07%. The ASX 200 index slumped 0.06% and the Seoul Kospi fell 0.23%.