Chorus Of Concern Lingers On Global Markets

"Due to price hikes, energy shortages and supply chain disruptions brought on by Russia’s invasion of Ukraine, the German government downgraded its economic projections for the ensuing two years. In contrast to the earlier estimate of 2.2 per cent, this year’s output is now anticipated to be 1.4 per cent."

In the past fortnight, the inflation report added to the chorus of worries that the Federal Reserve rate hike will continue. The major indices traded largely lower due to this, as investors weighed inflation statistics and their implications for the Federal Reserve policy even as the third quarter earnings reporting season got underway. The S and P 500 index has lost almost half of its gains since its low point in March 2020. Consumer discretionary and communication services’ shares underperformed on Wall Street, weighed down by Amazon, Tesla and Meta Platform.

The normally conservative healthcare and consumer staples sectors, however, outperformed. The CPI inflation figures exhibited that decreasing wholesale costs were not yet significantly affecting consumers. In fact, the trend was in the other direction. In September, year-over-year growth in core consumer prices was 6.6 per cent. This was more than anticipated, higher than the March peak, and rising at the quickest pace in four decades. The yields on Treasury notes increased during the course of the week, with the 10-year yield rising beyond 4.0 per cent and the two-year yield reaching 4.5 per cent, its highest level since 2007. 

Bond yields move in the opposite direction of bond prices. After a significant decline in the past fortnight, shares in Europe saw little movement. The STOXX Europe 600 index for all of Europe finished marginally lower. The continent’s major indices advanced with the DAX index in Germany gaining by 1.34 percent. The CAC 40 index in France increased by 1.11 per cent and the FTSE MIB index in Italy added 0.14 per cent. Meanwhile, the FTSE 100 index for the UK fell 1.89 per cent. On account of a decline in industrial output, the UK GDP unexpectedly declined 0.3 per cent, sequentially in August.

The job market tightened substantially during this time. In the three months ending August, the unemployment rate dropped to 3.5 per cent, the lowest level since 1974, although the number of people without jobs increased by record numbers. Due to price hikes, energy shortages and supply chain disruptions brought on by Russia’s invasion of Ukraine, the German government downgraded its economic projections for the ensuing two years. In contrast to the earlier estimate of 2.2 per cent, this year’s output is now anticipated to be 1.4 per cent.

The expected decline in the gross domestic product for 2023 is 0.4 per cent. The central bank’s positive remarks and the expectation of policy cues during the Communist Party Congress, a twice-decade assembly of the political elite, helped China’s stock markets rise. The CSI 300 index, which measures the biggest listed companies in Shanghai and Shenzhen, increased by 1.32 per cent, while the broad, capitalisationweighted Shanghai Composite index increased by 2.07 per cent last week. It simply goes to show that the various concerns affecting the global markets continue to hold sway and the light at the end of a dark tunnel may still be some distance away.