The new trading week starts with oil prices reaching multi-year highs, inflation surging, Bitcoin trading around $62,000, and global economies having to deal with the ramifications of the increasing prices.
US Dollar
The U.S. dollar has had an unsteady start for the week. At the time of writing, the New Zealand dollar and the British pound are trading higher than the U.S. currency. New Zealand’s inflation rose rapidly to its fastest pace in a decade while Britain’s Central Bank chief said that the bank will have to act to control inflationary forces and the lingering effect of high energy costs.
Global Markets
Equities fell in Japan, Hong Kong, and China as the economies experienced a slow-down in the third quarter. U.S. stocks closed higher on Friday and the S&P recorded its best week since July as earnings boosted investors’ sentiment.
New Zealand and Australia’s bond yields increased. New Zealand is experiencing accelerating inflation while the yields for Australia’s three-year bond jumped to their highest level since January this year.
Oil
Oil prices continued on their eighth week of gains. West Texas Intermediate (WTI) crude surged above $83 a barrel reaching its highest level in 7 years while Brent Crude almost touched $86 a barrel.
Inflation Talk
Investors remain concerned about inflation as increasing energy shortages are causing production cuts and surges in bond yields. Meanwhile, the economic recovery from the pandemic remains uneven and central banks are slowly and steadily getting closer to reductions in the stimulus. U.S. consumer sentiment dropped during the beginning of October, but retail sales went up.
Andrew Bailey, the governor of the Bank of England (BoE) said that the central bank will have to take measures to control inflationary forces and surging energy prices will add more pressure to rising prices. A Bloomberg columnist said that if the Fed pares back its Covid-19 stimulus measures, investors should prepare for high market volatility.
China
The plunge in China’s property market, the energy crisis, and the reduced consumer spending weighed down the nation’s growth. Talking about the China Evergrande Group, Yi Gang, People’s Bank of China Governor, said that authorities can contain the risks rising for the Chinese economy and financial system.
Bitcoin
Bitcoin is back to trading around $62,000 and close to its record high of $64,895. The cryptocurrency was propelled to these high levels probably due to its reputation as an inflation hedge and due to high hopes for the first U.S. Bitcoin futures exchange-traded fund receiving approval from U.S. regulators.
Events to Watch Closely this Week:
Company Earnings (including Netflix, Tesla, etc.) will be announced
Tuesday
Start of China’s NPC Standing Committee Meeting (The agenda includes anti-monopoly regulations)
U.S. Housing Starts
Wednesday
EIA crude oil inventory report
China property prices, loan prime rates
Thursday
U.S. existing home sales
US jobless claims
Friday
Fed Chair, Powell takes part in a policy panel discussion