In Japan, there is a decrease in inflationary pressures. The US has agreed to ease sanctions against Venezuela

As of Thursday's stock market close, the Dow Jones Index (US30) decreased by 0.75%. The S&P 500 index (US500) was down by 0.85%. The NASDAQ Technology Index (US100) closed negative by 0.96% yesterday. The broad market was under pressure as the 10-year bond yield rose to a 16-year high after an unexpected drop in weekly US jobless claims to an 8-month low, indicating labor market strength that could force the Fed to raise interest rates for longer. However, Fed Chair Powell's comments on Thursday were somewhat dovish, with Powell noting the following: "Given the uncertainties and risks, and how far we have come, the FOMC is proceeding carefully. We will decide the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks."

Quarterly earnings results were mixed for the market yesterday. On the positive side, Netflix is up more than 15% after the company reported a larger-than-expected increase in paid streaming users in the third quarter. Additionally, AT&T (T) and American Airlines Group (AAL) are up more than 4% after reporting better-than-expected third-quarter earnings per share. On the downside, shares of Tesla (TSLA) are down more than 8% after reporting weaker-than-expected third-quarter earnings per share.

British Prime Minister Sunak arrived in Israel yesterday, where he met with Israeli leaders before traveling to a number of other regional capitals as world leaders try to keep the Israeli-Hamas war from escalating.

Equity markets in Europe were mostly down on Thursday. Germany's DAX (DE40) fell by 0.33%, France's CAC 40 (FR40) lost 0.64% yesterday, Spain's IBEX 35 (ES35) decreased by 0.66%, and the UK's FTSE 100 (UK100) closed negative 1.17%.

The Italian government approved the budget for 2024, which includes tax cuts and spending increases with the intention of raising debt to cover the deficit. Italy's budget deficit in September became the largest in the country's history. Analysts believe that the country has not learned lessons from the European crisis of 2011/12, and this will lead to new economic problems. Moreover, it is also a negative factor for the ECB, as the growing budget deficit may trigger a new spiral of inflationary pressures in the region.

Economists expect the ECB to keep rates unchanged next week and mostly stay on a hawkish course, keeping the door open for another rate hike in December. While conflict in Israel and the Middle East and rising bond yields will further worsen the eurozone's growth prospects, a sharp rise in oil prices will put new upward pressure on inflation and make reaching the 2% target by the end of 2025 unlikely.

The US has agreed to ease sanctions on Venezuela, and market participants hope for an increase in oil production. However, according to experts, the lifting of sanctions will not lead to a rapid increase in production in the country but may help boost profits by bringing some foreign companies back to the oil fields. This is a move by the US to counter high oil prices globally, as OPEC+ has maintained production cuts until the end of 2023. This could help Venezuela's economic recovery from years of sanctions that have largely crippled the country's economy.

Asian markets traded mostly down yesterday. Japan's Nikkei 225 (JP225) decreased by 1.91%, China's FTSE China A50 (CHA50) lost 2.79%, Hong Kong's Hang Seng (HK50) was down by 2.46% by Thursday close, and Australia's ASX 200 (AU200) was negative by 1.36% for the day.

In a quarterly report released on Thursday, the Bank of Japan raised its economic estimates for most regions for more than a year, signaling growing confidence in Japan's economic recovery. Japan's core inflation in September fell below the 3% threshold for the first time in a year but remained above the central bank's target, maintaining expectations that policymakers will gradually taper ultra-soft monetary policy. However, analysts believe the BoJ is downplaying the likelihood of phasing out its massive stimulus in the near future, arguing that a pickup in demand-driven inflation should replace recent cost-driven price increases.

S&P 500 (F)(US500) 4,278.00 −36.60 (−0.85%)

Dow Jones (US30) 33,414.17 −250.91 (−0.75%)

DAX (DE40)  15,045.23 −49.68 (−0.33%)

FTSE 100 (UK100) 7,499.53 −88.47 (−1.17%)

USD Index  106.09 −0.49 (−0.46%)

• – New Zealand Trade Balance (q/q) at 00:30 (GMT+3);
• – Japan National Consumer Price Index (m/m) at 02:30 (GMT+3);
• – China PBoC Loan Prime Rate (m/m) at 04:15 (GMT+3);
• – UK Retail Sales (m/m) at 09:00 (GMT+3);
• – Hong Kong Inflation Rate (m/m) at 11:30 (GMT+3);
• – Canada Retail Sales (m/m) at 15:30 (GMT+3);
• – US FOMC Member Harker Speaks (m/m) at 16:00 (GMT+3);
• – US FOMC Member Mester Speaks (m/m) at 19:15 (GMT+3).

by JustMarkets, 2023.10.20

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.