LGT Navigator

US inflation data, the key to Fed monetary policy

After the recent price gains, stock indices on Wall Street started the week with no clear direction and closed little changed. The capital markets' attention is now focussed on the latest US inflation data expected this afternoon, which is seen as an important factor for US monetary policy. Investors are hoping for clarity on the future direction of the Federal Reserve, especially after the latest signals from various Fed representatives.

Alessandro Fezzi, LGT
Tempo di lettura
5 minuto
Federal Reserve Monetary Policy
© Shutterstock

The latest consumer price data from the United States will be at the centre of interest today. On average, economists expect the rate of inflation in the world's largest economy to have slowed further to 3.3% in October from 3.7% in September. The core inflation rate, i.e. excluding the often volatile energy and food prices, is forecast to remain unchanged at 4.1%. As is well known, the Fed has paused interest rates and appears to be assuming for the time being that inflationary pressure at least will not increase again immediately.

Investors on the New York Stock Exchange were cautious at the start of the week. Ahead of the upcoming inflation data, the Dow Jones Industrial ended Monday at 34,337.87 points (+0.16%) and the broad-based S&P 500 closed at 4,411.55 points (-0.08%). On the Nasdaq, the indices lost around 0.3%. Contrary to the trend, Tesla shares gained about 4%. The rating agency Moody's, which threatened to withdraw the USA's "AAA" credit rating, provided a negative impetus. Moody's had changed the outlook for the US country rating from "stable" to "negative". On the bond market, the benchmark yield on ten-year US government bonds remained little changed at 4.64%.

On the Asia-Pacific markets, most equity indices traded in positive territory on Tuesday. In Tokyo, the Nikkei 225 rose by 0.45% and the South Korean Kospi was 1.26% higher. The Kosdaq even rose by 2.1% after the index had previously fallen for five consecutive trading days. In Australia, the S&P/ASX 200 closed 0.8% higher, recovering after two sessions of declines. The Hang Seng Index in Hong Kong gave back its initial gains and fell by 0.2%, while the CSI 300 Index in mainland China gained 0.25%. Today's meeting between US President Joe Biden and Chinese leader Xi Jinping in San Francisco will take centre stage. Beijing said it wanted to put relations back on a "stable path of development". The two heads of state will meet during the Asia-Pacific Economic Community (APEC) summit in San Francisco. According to the Chinese Foreign Ministry, they will discuss issues including problems in relations between the two countries and the current geopolitical situation.

Europe's stock markets started the week with moderate gains, supported by positive guidance from the US at the end of last week. The EuroStoxx 50 closed 0.83% higher on Monday, remaining within the trading range of the past week and a half. According to ECB Vice President Luis de Guindos, Europe's central bank has not yet reached its goal in the fight against high inflation. "Although inflation has fallen significantly, it is likely to remain too high for too long and domestic price pressures remain strong," said de Guindos at an event in Frankfurt yesterday, adding that the ECB will therefore ensure that key interest rates are set at a sufficiently restrictive level for as long as necessary.

In the UK, a familiar face is intervening in current politics. Prime Minister Rishi Sunak has appointed former Prime Minister David Cameron as Foreign Secretary. Cameron resigned as Prime Minister in 2016 after the referendum he called for the UK to leave the European Union heralded Brexit. At the time, Cameron had campaigned in favour of remaining in the EU.

Corporate news in focus: K+S, RWE, Nordex, ProSiebenSat.1 with Q3 figures and Vodafone Group with half-year figures. From the USA Home Depot and Alcon with Q3 figures.

Economic data in focus: Germany Federal Ministry of Economics monthly report (November), UK unemployment figures October (08:00), Sweden consumer prices October (08:00), Switzerland producer and import prices October (08:30), Spain consumer prices October (09:00), Netherlands GDP Q3 (09:30), Germany ZEW economic expectations November (11:00), Eurozone GDP Q3 (2nd release, 11:00), US consumer prices and real incomes October (14:30).


LGT helps you make informed investment decisions

All about global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.