In the middle of the week, the share indices on the New York Stock Exchange continued to rise, while the momentum on Asia's stock exchanges had already been lost again. The latest economic indicators from the US confirmed the prospect of further weakening inflationary pressure, but also pointed to a still relatively robust economic situation. The capital markets are likely to be relieved that the shutdown in Washington was averted last night and that the meeting between US President Joe Biden and Chinese President Xi Jinping has been positive so far.
On Wall Street, further moderate inflation data led to price gains. The Dow Jones Industrial closed 0.47% higher at 34,991.21 points. For the first time since the end of August, the Dow temporarily climbed back above the 35,000 mark. The S&P 500 gained 0.16% and ended Wednesday's trading at 4,502.88 points. The indices on the technology-heavy Nasdaq remained virtually unchanged. On the bond market, the yield on ten-year US government bonds stood at 4.5% this morning. In foreign exchange trading, the euro fell again after the previous day's gains and is trading at around 1.0840 against the US dollar.
Meanwhile, the latest economic data confirmed a weakening of inflationary pressure in the US, but also indicated that the economic situation was not quite so bad. The annual rate of producer price inflation fell more sharply than expected in October to 1.3% from 2.2% in the previous month. Analysts had expected a more moderate decline to 1.9%. Producer prices have a delayed effect on consumer prices, on which the Federal Reserve (Fed) bases its monetary policy. At the same time, it was reported that retail sales fell less sharply than feared last month. On a monthly comparison, retail sales fell by 0.1%. Economists had expected a decline of 0.3%. Last but not least, the latest survey by the Federal Reserve New York showed that sentiment in regional industry brightened considerably in November. The Empire State Index rose from minus 4.6 to plus 9.1 points (consensus -3.0), reaching its highest level since April.
Positive news reached the markets from Washington, where a feared government shutdown was averted. Late on Wednesday evening, the Senate also voted in favour of an interim budget, following a vote in the House of Representatives on Tuesday.
In San Francisco, the meeting between US President Joe Biden and China's President Xi Jinping appears to have gone well. Among other things, the two countries want to resume high-level military communication.
In Asia, shares in Hong Kong led most indices downwards on Thursday. The Hang Seng Index fell by 1% after the index had risen by almost 4% in the previous session. Shares in the Chinese EV company Xpeng (-4.2%) were under pressure against the backdrop of a high quarterly loss. On the Chinese mainland, the CSI 300 fell by 0.7%. In Tokyo, the Nikkei 225 traded slightly lower shortly before the close, while the South Korean Kospi remained unchanged. In Australia, the S&P/ASX 200 fell by 0.6%.
As announced yesterday, Japan's economy contracted more sharply in the third quarter than economists had expected. According to an initial estimate, gross domestic product (GDP) fell by 2.1% on an annualised basis. The consensus forecast was for an annualised decline of 0.4%. In the second quarter, however, economic output in the third-largest economy had still grown by an annualised 4.5%.
As in the USA, inflationary pressure in the UK also weakened considerably in October. A year-on-year inflation rate of 4.6% was measured (consensus 4.7%), compared to 6.7% in September. Lower costs for housing and household services in particular had a dampening effect. In addition, food prices rose less sharply. The core rate, i.e. excluding energy and food prices, fell from 6.1% to 5.7%, but remains at a very high level. The cooling of inflation dampened speculation of a further interest rate hike by the Bank of England. As a result, the London Stock Exchange managed to jump into positive territory with a view to the current year.
Corporate news in focus: Zurich Insurance Group, Investor Day, Siemens annual figures, Burberry half-year figures, Aegon Q3 trading update, General Motors, Investor Day, Walmart, Macy's, Warner Music Group, Alibaba Q3 figures and Applied Materials Q4 figures.
Economic data in focus: From the USA, October import and export prices, initial jobless claims and Philly Fed industrial indicator (14:30), October industrial production (15:15) and November NAHB index (16:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.