By Geoffrey Smith
Investing.com – Fears of a return to “stagflation” – high inflation and low growth – spill over into global markets after disappointing US jobs report and continued rise in global energy prices – including crude oil, which hit a new seven-year high overnight. The Bank of England quickly goes into rate hike mode. But there is relief in China at signs that the crackdown on tech fortunes may be more barking than biting, as Meituan escapes a market abuse investigation with a slap on the wrist. Here’s what you need to know about the financial markets on Monday, October 11.
1. Fears of stagflation are growing
The dollar came out of its highs on Friday as the market digested a jobs report that pointed to a near-term US combination.
In a note to clients on Sunday, Goldman Sachs further reduced its growth forecast for this year by 0.1% to 5.6%, and also lowered its forecast for 2022 to 4%, from 4.4% previously, citing a “more lasting delay on the virus -sensitive consumer service spending” as well as the mitigation of the effects of previous stimulus measures.
Friday’s report was well below expectations, with the US economy only creating during the month. Average earnings have also increased faster than expected. What has caught the attention of analysts is mainly the failure of more people – especially women – to return to the workforce, which is seen by many as a sign of the how families are struggling to overcome the disruption to work patterns caused by the pandemic.
Overall, the report nailed down expectations for the Federal Reserve to start cutting bond purchases in November.
2. China’s crackdown – more barking than biting?
Sentiment towards Chinese ADRs is expected to change for the better, after food delivery giant Meituan for market abuse violations – one of the most high-profile cases of a large-scale attack by authorities on some of the China’s most valuable tech companies in recent weeks.
The State Administration for Market Regulation fined the Tencent-backed company just $ 534 million, causing its shares in Hong Kong to jump 8.4%.
Behind the scenes, however, the country’s real estate sector continues its long battle with the bond markets. Credit spreads on Chinese dollar corporate bonds hit an all-time high overnight, as China Evergrande prepared to miss full payment of more of its debt.
3. Stocks should slide on the open; The southwest in focus
US equity markets are expected to open lower later, under the combined pressure of slower growth and rising prices visible in a growing set of markets. Trading could be dampened somewhat by the calm ahead of the stormy third quarter earnings season and the Columbus Day holiday, which will keep the cash treasury market closed.
As of 6:15 am ET (10:15 GMT), were down 84 points, or 0.2%, while they were down 0.4% and 0.6%.
Stocks likely to be finalized later include Hasbro (NASDAQ :), whose CEO said he would take extended sick leave, and Southwest Airlines (NYSE :), after another traumatic weekend. rumbling through flight cancellations. Emerson (NYSE 🙂 Electric could also come under pressure after a report that it may form a joint venture with Aspen Tech.
4. British Pound Gains As Bank of England Goes Up
The US jobs report may not have done much to clarify when the Fed might raise interest rates, but across the Atlantic it is starting to look a lot clearer.
Two senior Bank of England officials reported an interview this weekend, Michael Saunders saying households should prepare for rate hikes “considerably sooner” and Governor Andrew Bailey expressing concern over how inflation expectations have started to rise.
It is despite widespread expectations that the economy will slow sharply in the final months of the year due to rising energy prices and benefit cuts reducing household disposable income.
Such talks pushed the pound higher against the and early trading in London.
5. Oil hits new high in seven years thanks to stagflation hedge
Crude oil prices have hit new highs in seven years as supply shortages localized in a number of pockets of the global energy market have been intensified by investors seeking to hedge against ‘stagflation’ by betting on ever higher prices. positions in crude oil hit their highest level in eight weeks, according to CFTC data released on Friday.
There was still more bad news on the supply side over the weekend, such as hitting production at a series of key mines and squeezing spot markets for alternative fuels even harder. Authorities have already raised official electricity prices for industrial consumers in an effort to relieve economic pressure on cash-strapped utilities. In better news, the Indian government has played down suggestions of a coal shortage at the country’s power plants.
As of 6:15 am ET (10:15 GMT), futures were up 2.8% to $ 81.58 per barrel, while futures were up 2.2% to $ 84.20 per barrel.
Elsewhere, Russia’s ambassador to the EU told the Financial Times that Europe’s gas shortage could be resolved fairly easily if the bloc saw Russia as a “partner” rather than an “adversary”.