Inflation in the United States is slowing down, but the US stock market isn’t growing

On Tuesday, the US Labor Department reported that the consumer price index increased by 0.3% (previous – 0.5%), with the inflation at 5.3% on a year-on-year basis. The core consumer price index, which excludes food and energy prices, increased by only 0.1%. The slowdown in employment and inflation may encourage politicians to postpone any moves to reduce the quantitative easing program. The US stock market is declining. The Dow Jones index decreased by 0.84%, the S&P 500 lost 0.57%, the Nasdaq decreased by 0.45%. The value of the Nasdaq is decreasing for the fifth session in a row. The sharp drop in treasury bond yields signifies that investors are preparing for the worst. At the moment, a continued rotation out of value stocks into high-quality growth stocks is evident. The technology and health care sectors are showing relative strength. Energy, financial and industrial sectors are showing relative weakness.

European stock markets closed Tuesday's trading without a single dynamic. The British FTSE 100 index decreased by 0.5%, the French CAC 40 lost 0.4%, the Spanish IBEX 35 decreased by 0.4%. Meanwhile, the German DAX increased by 0.1%, and the Italian FTSE MIB added 0.4%. The ECB president said that the economy is recovering faster than expected and expects the eurozone to reach pre-pandemic production levels later this year. The Bank of France raised its 2021 GDP growth forecast to 6.3% (previous – 5.75%) on the back of a faster-than-expected recovery at the end of the first half of the year. The UK inflation data will be released today. The Bank of England expects inflation to rise sharply this year and reach a peak of 4%. Strong inflation will strengthen expectations that the Bank of England will tighten monetary policy faster than the European Central Bank or the US Federal Reserve.

After a three-month drop in global oil demand due to the spread of the delta strain and renewed pandemic restrictions, vaccination will boost fuel demand and prices, the International Energy Agency (IEA) reported on Tuesday.

Yesterday, gold sharply increased as the US Treasury yields fell. The situation with precious metals is now mixed. On the one hand, soft monetary policy always contributes to the growth of gold and silver prices. On the other hand, fears concerning the upcoming reduction of the QE program limit growth of prices on precious metals.

Revised data from the Japanese Cabinet of Ministers, released last week, showed that the Japanese economy grew by 1.9% from April to June. This is above the median forecast of economists. Last Friday, Toyota Motor Corp, the world's largest automaker, cut its annual production by 300,000 vehicles due to the supply disruptions at the production factories in Malaysia and Vietnam caused by a global shortage of automotive chips.

Meanwhile, in China, the world's largest auto market and a key sales region for Japanese automakers, the same supply problems contributed to a 17.8% (on a year-on-year basis) drop in auto sales in August.

Shares of China's tech companies decreased as the government's control over Macau casinos strengthened the concerns that Beijing would strengthen regulatory measures. The country's slowdown in retail sales also put pressure on e-commerce stocks.

Chile, the largest copper producing country, decreased its annual price forecast for the metal due to slowing demand in China and the prospect of easing stimulus measures in the United States.

Main market quotes:

S&P 500 (F) 4,443.05 −25.68 (−0.57%)

Dow Jones 34,577.57 −292.06 (−0.84%)

DAX 15,722.99 +21.57 (+0.14%)

FTSE 100 7,034.06 −34.37 (−0.49%)

USD Index 92.65 −0.03 (−0.03%)

• – China Industrial Production (m/m) at 05:00 (GMT+3);
• – China Retail Sales (m/m) at 05:00 (GMT+3);
• – China Unemployment Rate (m/m) at 05:00 (GMT+3);
• – UK Consumer Price Index (m/m) at 09:00 (GMT+3);
• – Eurozone Industrial Production (m/m) at 12:00 (GMT+3);
• – Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
• – US Industrial Production (m/m) at 16:15 (GMT+3);
• – US Crude Oil Inventories (w/w) at 17:30 (GMT+3).

by JMarkets, 2021.09.15

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.