Little trading volume yesterday in global financial markets, which are still awaiting the September inflation data for the United States. The consensus expects the headline price increase to be 8.1%, two tenths below last month, which maintains the downward trend in the headline figure, mainly supported by a reduction in energy costs – which will no longer be a negative contributor in the coming months following the oil price hikes stemming from the cut announced by OPEC+ -.

However, the Fed and investors will pay more attention to core inflation, which is expected to reach levels of 6.5% and continue the upward trend seen in recent months mainly due to two factors. On the one hand, the strength in demand for services, as shown by the business confidence data – ISM services -, and on the other hand, the lag with which adjustments in real estate prices are reflected in inflation estimates, which will continue to contribute to the upside despite the weakness in housing prices over the last two months.

Finally, on this occasion, we do not believe that the September data will change the course of hikes until the end of the year and if anything could accelerate them putting more pressure on the December meeting, where the odds of seeing a further 75 b.p. hike have increased considerably.   

The S&P 500 returns to the lowest since November 2020. The main US index fell back below 3,600 points, in a session that moved in narrow margins and ended up losing steam in the last part of the day after the release of the Fed minutes. Sectorally, energy (+0.7%) continued to benefit from the upturn in oil prices, while consumer staples (+0.4%) and discretionary (+0.2%) also performed well in the face of macro data that showed no weakness in employment. On the negative side, utilities (-3.4%) are beginning to show the damage caused to energy infrastructures by the passage of Ian, which for the moment is manageable, at least according to the management team of the main North American energy company Nextera (-4.3%).

New sell-offs in the European stock markets. The sales were not very noticeable in the cases of the EuroStoxx 50 (-0.2%) and Dax (-0.3%) and more significant in the Southern European indices (Ibex and Mib -1.2%). Both were pressured by the banks and, in the case of Spain, with low volumes traded on Columbus Day, which left the index at a 23-month low. In this context, British banks such as Lloyds Banking Group (-5.8%) and Natwestgroup (-4.1%) fell, affected by the turbulence affecting British fixed income. In Spain the worst performer was Santander (-1.5%) and in Italy FinecoBank (-3.8%), both with business in the United Kingdom. On the positive side, a good session for LVMH (+1.8%), after publishing a better-than-expected quarterly sales figure, and the pharmaceutical company Rovi in Spain (+2.8%).

Asian equities are sold off again, awaiting the US inflation report. The MSCI Asia Pacific index loses 0.6% this morning, the fifth consecutive session of declines, waiting for the US price data to be released later today. In Japan, losses have now reached four consecutive sessions, with declines of 0.6% for the Nikkei and -0.7% for the Topix, following the publication of a bad wholesale prices data, at a five-month high, and without the yen’s decline, at a 24-year low against the dollar, helping the stock markets. We also witnessed setbacks in China, with sell-offs for the Hang Seng (-1%) and CSI 300 (-0.5%), amid an increase in the number of Covid-19 cases and just a few days before the start of the Communist Party congress.

Bonds remain cautious ahead of inflation data. Sovereign bonds were little changed yesterday, with some movement in the US 10-year bond, which returned to below 4% Tir. European fixed income markets remained in the same vein, with the main news being the resistance in sovereign spreads, which remain unchanged from the levels seen in June.

In the currency market, little change in the euro-dollar cross, bringing out the dollar’s status as a safe haven asset and without excessive fluctuations in recent sessions. This marks 0.97 EUR/USD. On the sterling side, and in anticipation of new support measures from the Bank of England, the British currency advanced yesterday to 0.874 EUR/GBP. This morning, the cross is trading at 0.875 EUR/GBP, with little change.  

As for commodities, corrections continue for the price of crude oil. The Brent benchmark has accumulated losses of close to 6% so far this week, standing at $92.3/barrel this morning. The falls come after the strong rises seen in the previous week, following the sharp cuts in production announced by OPEC+ and in the midst of the dialectic exchange of accusations between the US, in favor of keeping its price at lower levels, and Saudi Arabia, with opposing interests. Gold, meanwhile, begins the penultimate weekly session with small declines (-0.2%), at $1,668.5/oz, awaiting the US price data.