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[November 07, 2022] A
look at the day ahead in U.S. and global markets from Mike Dolan.
World markets appear at ease with the
prospect of U.S. legislative gridlock after Tuesday's mid-term
congressional elections, with one wary eye on a critical inflation
update later in the week.
According to some investment models, there is roughly a 70% chance
Republicans will win both the House and Senate majorities from the
Democrats in the US mid-terms - dousing prospects for any new
inflation-aggravating spending push by Joe Biden's White House over the
next couple of years.
With stocks and bonds whacked all year by the Federal Reserve's
relentless monetary tightening to rein in sky-high price rises, an
effective fiscal brake may be encouraging hopes the Fed can eventually
back off next year - even if some fret it also ties the government's
hands in any steep economic downturn.
Thursday's U.S. consumer price report will update all on the scale of
the problem still at hand, with headline inflation expected to have
eased back in October to 8.0% - its lowest since February, even if still
far above the Fed's 2% target. The 'core' rate is forecast to tick down
to 6.5%.
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Even after another relatively robust U.S. jobs report on Friday,
interest rate and bond markets have remained calm into the new week,
with U.S. 10-year Treasury yields quickly backing off 2-week highs. The
dollar was on the backfoot and Wall St stock futures were marginally in
positive territory.
Apple shares were down 1.5% in Frankfurt trading after the tech giant
warned on Sunday of lower shipments of its premium iPhone 14 models than
first indicated following a significant production cut at a
virus-blighted plant in China, dampening its sales outlook for the
year-end holiday season.
Chinese stocks continued last week's tentative recovery, however,
despite officials throwing cold water on any early end to draconian
COVID lockdown policies. Some correction of the market's severe
underperformance this year was about the only cogent reason given for
the ongoing stock bounce.
The country reported on Sunday its highest number of new COVID-19
infections in six months, a day after health officials reiterated their
commitment to strict coronavirus curbs.
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![](../images/110722PIX/busine81.jpg)
Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., September 26,
2022. REUTERS/Brendan McDermid
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In another illustration of the economic problems the restrictions
have caused, China's exports and imports unexpectedly contracted in
October, the first simultaneous slump since May 2020. China's
foreign exchange reserves rose unexpectedly in October, official
data showed on Monday.
In Europe, shares in UniCredit fell on Monday after a report of
tensions between Italy's only bank that regulators deem of global
systemic relevance and European Central Bank supervisors.
France's central bank chief Francois Villeroy de Galhau was reported
as saying the ECB must keep raising interest rates until underlying
inflation has peaked, but may slow the pace of hikes once rates hit
a level that starts to restrict growth.
Elsewhere, delegates from nearly 200 countries kicked off the U.N.
climate summit in Egypt on Sunday with an agreement to discuss
compensating poor nations for mounting damage linked to global
warming, placing the divisive topic on the agenda for the first time
since climate talks began decades ago.
Key developments that may provide direction to U.S. markets later on
Monday:
* U.S. Conference Board Oct Employment Trends Index, U.S. Sept
consumer credit data
* Cleveland Federal Reserve President Loretta Mester, Boston Fed
President Susan Collins, Richmond Fed chief Thomas Barkin speak
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* U.S. Corporate Earnings: Mosaic, Alliant Energy, Diamondback
Energy, NRG Energy, NiSource, Solaredge Technologies, Activision
Blizzard, International Flavors & Fragrances
* United Nations climate conference in Egypt. Eurogroup finance
ministers meet in Brussels. European Central Bank President
Christine Lagarde and ECB board member Fabio Panetta both speak. And
Bank of England chief economist Huw Pill speaks.
(By Mike Dolan, editing by Andrew Heavens mike.dolan@thomsonreuters.com.
Twitter: @reutersMikeD)
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