European and US Markets Show Little Movement
European stocks and US futures remained largely unchanged on Friday as traders processed higher-than-expected US inflation data and prepared for the start of the earnings season. The Stoxx 600 index and S&P 500 contracts traded flat, following a week when US stocks hit new record highs. However, Europe’s Stoxx 600 experienced a slight dip, while France’s 10-year bond yield fell after the government announced a budget focused on spending cuts and tax measures to address public debt.
US Inflation Concerns Weigh on Markets
The hotter-than-anticipated inflation print for September, along with rising unemployment benefits, highlighted the ongoing challenges facing the Federal Reserve. These signals suggest that the effort to bring inflation down to target levels is stalling. Investors are now looking to the US September producer-price data, expected later on Friday, for further clues about the Fed’s next steps.
David Donabedian, Chief Investment Officer at CIBC Private Wealth US, commented on the situation: “The Fed said the last mile to hit their inflation target would be tough, and that’s exactly what we’re witnessing. However, we still anticipate a quarter-point rate cut in November, followed by a similar cut in December.”
Traders Expect Fed to Maintain Rate Cuts
The swaps market, which predicts potential rate changes, remained stable. Traders still see an 80% likelihood of a 25 basis point rate cut in November, slightly lower than last week when strong US jobs data had led to full pricing of the move.
Federal Reserve policymakers, including John Williams, Austan Goolsbee, and Thomas Barkin, appeared unconcerned by the higher-than-forecast consumer price index, suggesting the Fed could continue its plan to ease interest rates.
US Earnings Season Kicks Off
Investors are also gearing up for the third-quarter earnings reports, expected later on Friday, from major banks including JPMorgan Chase & Co., Wells Fargo & Co., and Bank of New York Mellon Corp. JPMorgan’s outlook for net interest income will be closely watched after the bank’s executives worked to temper expectations for this crucial revenue stream. For Wells Fargo, investors will be looking for any updates on its asset cap.
Chinese Markets Decline Ahead of Key Announcement
In China, the CSI 300 Index fell 2.4% in afternoon trading as caution grows ahead of an important weekend briefing. This event may provide more clarity on Beijing’s plans for fiscal stimulus. Analysts and investors expect Chinese authorities to announce as much as 2 trillion yuan ($283 billion) in new fiscal measures aimed at boosting economic growth and restoring market confidence.
Oil Prices Edge Lower
Oil prices dipped slightly on Friday, trimming some of the gains made on Thursday when West Texas Intermediate (WTI) crude futures surged 3.6%. Traders are closely monitoring the situation in the Middle East as they await Israel’s response to Iran’s recent missile attack.
Related topics:
