Stock markets stall on growth and interest rates concerns
Stock markets have opened mixed in Asia with safe haven assets, including gold, Japanese yen and government bonds, trading higher. The hint of risk off mood crept into the markets, as investors feel less at ease with the outlook for interest rates and growth. Oil prices dropped to a six-week low on concerns over supply and prospects over China and US using their fuel reserves. The day ahead is light on calendar with a few speeches from central banks scheduled in the US and Europe. In terms of data, US jobless claims, Philly Fed Manufacturing Index and CB Leading Index will be published today. UK is expected to release GFK Consumer Confidence.
US equities finished slightly lower but remained just off record highs. Dow Jones declined 0.6% to 35,931, the S&P 500 decreased 0.3% to 4,689 and the Nasdaq lost 0.3% to 4,689. Retail earnings were mixed with Target Corporation bearing the expectations and raising its full-year forecast. The economic calendar on Wednesday was dominated by housing data, with October housing starts coming in below forecasts and mortgage applications declining. However, the figures showed a jump in building permits and the rise in backlog of house construction supporting the strong demand suggested by better-than-expected Retail Sales on Tuesday.10-year Treasury yields are holding at 1.5906 after falling 5.5 bps on Wednesday. US Dollar is looking strong with DXY trading around 95.65. The weekly initial jobless claims numbers due today are set to provide an outlook for US labour market.
European markets have opened marginally lower with DAX trading 0.1% lower, CAC 40 dropping 0.1% and FTSE 100 falling 0.1%. Most European indices are keeping near record levels boosted by strong corporate earnings, but concerns are growing on Europe’s inflationary outlook and the impact this could have on monetary policy. Eurozone’s inflation reached 4.1% in October, as confirmed on Wednesday, which is twice the ECB’s target. UK’s inflation has come out at 4.2%, its highest in 10 years. While ECB continues to maintain the view that the inflation pressures should ease, Bank of England is widely expected to be the first central banks to hike rates. Meanwhile corporate earnings season continues with Thyssenkrupp expected to beat the expectations. The euro has recovered from a dip below $1.13 on Wednesday but remains unstable at $1.1317 in its worst month on the dollar since June.
Asian markets were trading mixed today with softest mood in Hong Kong where concern over earnings outlook weighed on tech and a 5% drop in Alibaba dragged the Hang Seng 1.3% lower. Japan’s Nikkei fell 0.1% and MSCI broadest index of Asian shares outside of Japan dropped 0.5%. China Evergrande Group is selling its entire stake in streaming services firm Heng Ten Network Group for $273.5 million, as it is trying to avoid default on its debts.
Oil prices dropped to near six-week lows on Thursday with Brent down 0.5% to $79.87 and WIT losing 0.9% to $77.66. The move lower was on the back of China moving to release reserves following a Reuters report that the US was asking large oil consumers to consider a coordinated release of stocks to lower prices. US has asked China first time to join coordinated action. Oil prices hit seven-year highs in October as the market focused on post pandemic rebound in demand, while OPEC+ is taking time to increase supply.