Stock markets move higher before the FED

Nov 3, 2021
  • EUR/USD   1.1579
  • DOW JONES   36’052
  • USD/CHF   0.9141
  • SMI     12,321
  • EUR/CHF   1.058
  • WTI CRUDE OIL   82.54
  • USD/RUB   71.48
  • XAU/USD  1781
Last week, the main stock markets continued the rebound that began in early October. The t...

Last week, the main stock markets continued the rebound that began in early October. The three major indices (S&P 500, Dow Jones and Nasdaq) set new records.

The New York Stock Exchange finished slightly higher yesterday as the market awaits the FED’s monetary policy statement this evening. The Dow Jones Dow Jones index is at 36’052. The S&P-500 gained is at 4’630. The Nasdaq Composite advanced to 15,649 points. Investors and market experts are confident that the Fed will announce a reduction in its asset purchases on Wednesday but they will be watching for any sign of a rate hike and comments on the level of interest rates and comments on the level of inflation.

US bonds gained ground yesterday. The move could be explained as a technical rebound ahead of the Fed meeting starting tonight and by the lack of significant economic statistics. 10 year US #Treasury yield now at 1.52%.

In Europe, government bonds were favored by the slowdown in the growth of manufacturing activity in the Eurozone, confirmed by the weakening of the PMI index for October, which came out yesterday at its lowest level in eight months. 10 year German #Bund yield now at -0.18%.

It is more or less a given that the Fed will announce a reduction in its bond purchase program of 120 billion dollars per month and that its boss should acknowledge that inflation is turning out to be less transitory than expected during the press conference. Note that in Europe, the Bank of England and the Norwegian Central Bank are also meeting this week. The former is considering to raise its rates, while the latter has already done so.

Note that Tesla’s stock gained nearly 8% on Friday alone.

The CHF gained further ground against all currencies, reaching its highest level against the EUR since May 2020. The pair touched 1.0547 at its lowest point yesterday, despite likely intervention by the SNB. Deposits at our national institute rose by almost CHF 2 billion at the end of last week compared to the previous week. This suggests that the pace of intervention increased as the psychological threshold of 1.06 was crossed.

Gaz prices fell sharply last week after Russian President Vladimir Putin ordered an increase in gas deliveries to the European Union once Russian tanks filled. The European benchmark price, the Dutch TTF, has lost 31% since the announcement on Wednesday evening. The price per megawatt-hour (MWh) has fallen back below EUR 65.00 for the first time since September 27.

The Turkish lira recovered nearly 1% against the $ to 9.50 after hitting an all-time low last week at 9.85 following the publication of a trade deficit down 39% in October to 1.46 billion. This also comes after Erdogan met with Biden this weekend on the sidelines of the G20 summit to try to tighten relations that have been strained in recent months.

Between July and September, the GDP of the countries belonging to the single currency grew by 2.2% compared to the previous quarter. Growth was 2.1% in the second quarter, in the wake of a 0.3% recession in the first quarter. The robust growth in the third quarter brings the member countries closer to their pre-pandemic levels.

U.S. personal incomes fell by 1% in September, due to the expiration of the more generous unemployment benefits that had been paid out since the start of the pandemic. This decline was more important than the 0.3% decline expected. The expenditures, on the other hand, continued to rise, by 0.6%, although the pace has slowed somewhat from the 1% increase in August.

Oil prices ended mixed just hours before the start of the monthly Opec+ meeting on Thursday. Some traders are now considering the possibility of a larger than expected increase in production. It was mentioned 400,000 barrels per day each month until September 2022 but some now believe that the institution could go beyond that to relieve the markets.