Daily markets: stocks grappling with energy shortages, supply chain issues and growing inflation concerns

The big picture of today

Asia’s major stock indexes ended on a level playing field, led by gains in Hong Kong, where the Hang Seng rose 2.0%. China’s Shanghai Composite was slightly higher while the Shenzhen Component fell 0.3%. Japan’s Nikkei 225 rose 1.6%, but Australia’s ASX 200 fell 0.2%. The markets in Taiwan and South Korea are closed for holidays today. By midday, stock indices in Europe were mostly in the red, with the Bank of England signaling that interest rates may rise earlier than expected as inflation is back on the radar screen.

Banks in the United States, as well as the bond markets, are closed today due to the federal holiday, but the U.S. stock markets are open and stock futures indicate a downside when those markets open later. this morning. With no economic data or earnings reports forecast for today, there’s a good chance it will be a quieter day on the information flow front, but that doesn’t mean that transactions in actions will be ho-hum. These markets will be grappling with energy shortages on top of existing supply chain problems and growing inflation concerns. The 10-year T-bill yield exceeded 1.61% early today, indicating that despite Friday’s disappointing jobs report, investors are ready for the Federal Reserve to start cutting back on its purchases of active later this year.

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International economy

Bank of England policymaker Michael Saunders has asked households to prepare for an interest rate hike “considerably sooner” as inflationary pressure intensifies and BoE Governor Andrew Bailey said inflation above target was a cause for concern.

At the European Central Bank, Governing Council member Francois Villeroy de Galhau said he expects inflation to peak in the coming months, then drop back below 2% by the end of the year. next year.

China’s coal future has reached an all-time high as flooding has forced dozens of mines to close and displaced more than 100,000 people, at a time when the country is already grappling with power outages. The extreme power shortage has already resulted in production cuts that are likely not only to be a headwind for the global economy, but add to supply constraints for a variety of commodities, including food, paper, wool, technology and automobiles.

Over the weekend, Delhi Chief Minister Arvind Kejriwal warned of an electricity crisis in the Indian capital due to a coal shortage, which has already triggered power cuts in some of the eastern and northern states of the country.

Italian industrial production in August was much stronger than expected, reaching 7% yoy against expectations of a decline to -0.7% yoy.

Domestical economy

Friday’s jobs report was not only disappointing, it was a big mess of mixed signals that even led the BLS to admit that “recent job changes are difficult to interpret, as staff fluctuations are pandemic-related public and private education have distorted normal seasonal patterns of hiring and firing.

It was the second month in a row that payroll figures were well below expectations, but Friday’s reading was the lowest of the year. At this point, 78% of the 22.3 million jobs lost in 2020 have been recovered. The August number has been revised up to + 366k from + 235k, but still well below the consensus estimate of + 733k. The private payroll for September only increased by + 317k against the expected + 450k. We draw your attention to the fact that temporary employment, which is one of the best leading indicators of the employment market, fell by 5k over the month.

During the weekend, Goldman Sachs (GS) lowered its GDP forecast for 2021 to 5.6% from 5.7% and reduced its GDP outlook for 2022 to + 4.0% from + 4.4%.

West Texas Intermediate crude oil futures topped $ 80 a barrel for the first time since 2014 as oil prices benefited from a serious tailwind driven by soaring natural gas prices and falling prices. stocks.

Cotton prices hit a 10-year high on Friday, hitting $ 1.16 a pound and reaching levels not seen since July 7, 2011. Cotton’s 6% move last week led the commodity to close the week up 47% since the start of the year. Meanwhile, Green Markets’ North American fertilizer price index climbed last week to a new record high of $ 996.32 per short ton, pushing up costs for farmers and threatening to worsen food inflation.

There are no important economic indicators to release today.

Markets

Following the weaker than expected September employment report, investors considered the timing of the Fed’s stated intention to cut its bond purchases later this year. The S&P 500 fell 0.2% on Friday, while the Nasdaq Composite and Russell 2000 fell 0.5% and 0.8% respectively. The Dow Jones Industrial Average ended Friday’s trading day little changed. Despite Friday’s declines, the Dow Jones managed to end the week up 1.2%, the S&P added 0.8% on the week and the Nasdaq rose 0.1%.

Actions to watch

Profit announcements and advice

Before the US stock markets open this morning, no company is expected to release quarterly results.

Southwest Airlines (LUV) canceled 808 flights on Saturday and 1,006 others on Sunday, attributing the disruption to air traffic control issues and weather. We note that no other major airline has announced a significant increase in flight delays or cancellations. As of 7 a.m.ET today, the company canceled 349 flights and delayed 184 more for today.

Yet another Chinese real estate developer, Modern Earth (1107: HKG), is in trouble, asking for three months to repay a $ 250 million bond. In a filing on the Hong Kong Stock Exchange today, the company said it was asking non-U.S. Bond holders to extend the maturity from October 25 to January 25, 2022, and asked to reduce the size of the bond, repaying less than $ 88 million. This follows last week’s missed payment by Fantasia and the lawsuit Evergrande (EGRNY) drama, which saw its shares alongside those of Evergrande Property Services (EVGPF) suspended since October 4 pending an agreement yet announced.

Honda engine (HMC), Nissan Motor (NSANY), and Toyota Motor (TM) saw sales plummet in China in September as a chip shortage hit vehicle production in the world’s largest auto market.

Automotive technology company Aptiv (APTV) slashes its outlook for 2021 and now sees revenue for the year in the range of $ 15.1 to $ 15.5 billion, up from $ 16.1 to $ 16.4 billion and the consensus estimate of $ 15.8 billions of dollars. Adjusted operating margins for the full 2021 fiscal year are now expected to be between 7.6% and 8.4% from the previous 9.9% and 10.2% due to “operational inefficiencies, increased costs of supply chain disruption and other uncertainties ”.

In the third quarter of 2021, Niu Technologies (NIU) sold 397,079 electric scooters, representing a year-over-year growth of 58.3%. The number of electric scooters sold in the Chinese market reached 392,112, representing a growth of 59.9% year-on-year.

IPO

Initial public offerings expected to be priced this week include those of AvidXchange (AVDX) and Gitlab (GTLB).

Merger and acquisition activity

Cleveland Cliffs (CLF) has entered into a definitive agreement to acquire Ferrous Processing and Trading Company for an aggregate enterprise value of approximately $ 775 million, on a cash-free, debt-free basis and subject to customary adjustments.

After today’s market closes

No company is supposed to publish its quarterly results. Those looking to get a glimpse of the revenue reports to be had in the coming days should visit Nasdaq earnings calendar page.

On the horizon

  • October 12: JOLTs report
  • October 13: IPC, FOMC report
  • October 14: Weekly unemployment registrations, PPI, Monthly budget statement
  • October 15: Retail sales, import and export prices, NY Empire State Manufacturing, Michigan Consumer Sentiment (preliminary), company inventories
  • October 18: Industrial production, NAHB housing market index, long-term net ICT flows, investment in foreign bonds, aggregate net capital flows

Thought of the day

“Your body is not a temple, it is an amusement park. Enjoy the ride. “~ Anthony Bourdain

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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