American indices ended last week with growth, and the dynamics turned out to be the best over the past three months. The capitalization of the S&P 500 increased 1.8%, while the Nasdaq 100 rose 2.2%. In recent weeks, investors have been worried about the situation around the rise in energy prices, disruption of supply chains and inflationary expectations. However, the corporate reporting season, which traditionally begins with the results of the largest banks, has inspired optimism among investors. Quarterly financial results exceeded market expectations, as banks demonstrated strong profitability due to the release of loan loss provisions created during the lockdown last year and an increase in income from investment banking, including M&A transactions. The market will continue to closely monitor corporate reports throughout the week, especially for the results of the largest technology companies, which may set the further trajectory of the movement of stock indices. We believe that during the current week the market indicators will continue to rise, however, we assume that there may be unpleasant surprises in the reporting season, due to which the volatility increases.
On Wednesday, September inflation data was published, which almost coincided with market expectations. Consumer prices in the United States rose 5.4% from the same month last year. Thus, inflation accelerated compared to 5.3% a month earlier and was the highest in 13 years. Analysts on average had expected it to remain at the August level of 5.3%. The market reacted neutrally. On the same day, the minutes of the September meeting of the FRS was released, which states that the leaders of the American Central Bank are ready to start curtailing the quantitative easing program in the coming months and complete it by mid-2022. Fed executives discussed a rough plan to cut asset buybacks by $ 15 billion a month, in particular US Treasuries by $ 10 billion and mortgage bonds by $ 5 billion. The news was greeted with optimism, as consensus suggested that the Fed would wind down the program more aggressively at a rate of more than $ 20 billion monthly. The Fed’s decision indicates that the regulator sees significant progress in the recovery of the US economy from the effects of the pandemic. The market is no longer frightened by the signals about the growth of key interest rates, since the expectations are already included in the current prices. The first increase is expected to take place as early as September 2022.
On Monday, September data on US retail sales will be released, as well as important statistics in China, namely GDP for the third quarter, September data on industrial production and retail sales. On Tuesday, statistics on the number of new buildings in the United States for September will be released, as well as speeches by the President of the Federal Reserve Bank of San Francisco Mary Daly, President of the Federal Reserve Bank of Atlanta Rafael Bostic, member of the Board of Governors Christopher Waller. On Wednesday, the Fed’s Beige Book will be published and the updated data on inflation in the eurozone for September will be released. On Thursday, Waller from the Fed will speak, as well as data on US home sales in the US for September and an index of leading economic indicators will be released. EU leaders will discuss the energy crisis, Covid-19, digital transformation, migration and international relations. On Friday, the preliminary October PMI indices for the US and the Eurozone will be published.