Stocks Are Off to a Mixed Start Due to Inflation Concerns

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Stocks appeared to be off to a mixed start. On Monday, U.S. share futures dipped as traders assessed the risks to the global economy from an energy crisis against the potential of tighter monetary policy to combat inflation.

Australian equities fell, while futures for Japan fell after previously signalling gains in Hong Kong. The S&P 500 and Nasdaq 100 contracts were in the negative after the indexes sank Friday in the aftermath of US employment growth statistics that fell severely short of expectations while simultaneously showing an increase in earnings.

Treasuries fell after the data, pushing the 10-year yield beyond 1.6 percent. Wage increases and an increase in energy costs indicate pricing pressures that support the case for tighter monetary policy. Many strategists believe the Federal Reserve will begin to reduce its bond purchases in the coming weeks. Due to a U.S. holiday, there will be no cash Treasuries trading on Monday.

West Texas Intermediate crude rose and was trading around its highest level since 2014. The New Zealand dollar fell when Covid-19 instances increased.

In the United Kingdom, authorities at the Bank of England tried to reinforce indications of an impending rise in interest rates in order to combat inflation. Aside from central bank tightening, investors are also anticipating third-quarter firm profit reports and closely following China’s debt issues and downturn in the housing industry.

“The tapering is pretty much on track for November,” said Simon Ballard, chief economist at First Abu Dhabi Bank, on Bloomberg Television. The jobs report shifts the “emphasis to later rather than sooner” in terms of Fed rate hikes.

Economists at Goldman Sachs Group Inc. reduced their projections for US GDP this year and next, blaming a sluggish recovery in consumer spending. The decreases were primarily compensated by increases in estimates over the next two years.

Elsewhere, tensions over Taiwan are rising. President Tsai Ing-Wen said the island is experiencing “unique challenges” and will protect its sovereignty, responding to Chinese leader Xi Jinping’s declaration a day earlier that unification will occur. Taiwanese markets are closed during the holiday season.

Published by Zack Baharum

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