It is a new week in the financial markets, and one that will open slowly, with many investors still digesting last week’s big data dump, especially the disappointing non-farm payrolls from the United States.
Today there will be no major reports. The first semi-relevant release of the day was industrial production data from Italy for the month of August, which was slightly better than expected. Later today we’ll hear from the European Central Bank, though no major announcements are expected. That is all for fundamental reports today.
There will be no data released in the US today as the country celebrates Columbus Day.
The overall market sentiment remains grim. Last week’s labor market data from the United States shows that the recovery in the world’s largest economy is not happening at the expected pace, even though inflation is climbing rapidly higher.
As a result, the economy is in a state of ‘stagflation,’ which means inflation rates are going up but do not reflect actual economic growth. This is happening in the United States, but also in the United Kingdom and in the European Union, to a certain extent.
Stagflation poses a risk for the markets, because it makes it more difficult for investors to predict how well the global economy is doing. It also makes inflation data less reliable, especially in the context of the energy crisis.
In other news, investors are also keeping an eye on the Chinese markets. Evergrande Group is due to miss another payment this week. It has already missed several, triggering a 30-day grace period, so each day brings us closer to the company’s official default, which is keeping the pressure high in the real estate sector.
US stock indices today will trade slightly lower due to the general market apprehension and fears of the global economy still not being on its path to proper recovery nearly two years since the beginning of the coronavirus pandemic.
The same worries persist in the United Kingdom as well, but the Bank of England has announced it is getting ready to hike interest rates soon in order to keep inflation at bay. Fundamentals from the UK will likely turn worse thanks to the spike in fuel prices and the end of the government’s stimulus scheme, but inflation has been persistently high, worrying the Bank of England.
As a result, the British pound appears as one of the best performing currencies today and is doing better against the euro and the US dollar both.
