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Worst September In The Last 20 Years Concludes

Published 10/03/2022, 03:17 AM
Updated 07/09/2023, 06:31 AM

Although the European stock markets closed with a positive sign on Friday, investors were taking a step back to evaluate the data on inflation in Europe and the US since they are afraid of a global slowdown in growth and an aggressive tightening of the monetary policy by Central Banks.

The new record from 9.1% inflation in August to 10% inflation in September, as the European Statistical data showed, is provoking worries for the ECB to raise the interest rate again by 75 bp. Ten countries out of the 27 in the Eurozone announced double-digit inflation rates. DAX closed for the third consecutive week in a negative sign at -1.38%.

On the other side of the Atlantic, things in the US region are pretty much the same since personal consumption expenditures – the FED’s ideal measure of inflation – rose 0.3 percent in August from July.

Specifically, after the drop of 0.2% in July, consumer spending rose 0.4% in August. Over the next five years, consumer expectations for average inflation fell slightly from 2.8% to 2.7%. Consumers’ expectations for inflation next year fell to a one-year low of 4.7%, down from 4.8% the previous month.

All those readings force the US officials to tighten the monetary policy for some time to ensure inflation returns to target. Dow lost 2.9%, the S&P 500 2.9%, and the NASDAQ 2.7% weekly. On a monthly basis, the industrials index fell 8.8%, the broader market index fell 9.3%, and the technology index posted double-digit losses at 10.5%.

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The Economic Calendar of the week has interesting readings, such as Germany Manufacturing PMI, as well as the Eurozone, UK’s, China’s, and the US‘s one for September, Australia Interest Rate Decision, US Job Openings for August, Germany Services PMI for September, as well as Eurozone’s, and UK’s, crude oil inventories (weekly release), US Trade Balance for September, Germany Factory Orders for August, UK Construction PMI for September, initial jobless claims (weekly released), Japan Household Spending for August, Germany Industrial Production for September, US Nonfarm Payrolls, and US Unemployment Rate for September, including the speaking of Mrs. Lagarde and Mr. Powel.

From a technical perspective, we see room for further weakness in equities, but with the BOE QE announcement, we think a big change in sentiment is coming.

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