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Investors Expect A Reduction Of The Quantitative Easing Program In The US, Europe, And UK

The US industrial production increased to pre-pandemic levels, indicating a further economic recovery. All figures indicate that the US economy is in a good position, and it doesn’t make sense for the Federal Reserve to maintain the stimulus program in such volumes. Therefore, there is a high probability that the Fed will announce a gradual cutting of the QE program starting from November at the meeting on September 22 (this year). At the same time, JPMorgan & Chase Co. reduced the estimate of the US economic growth in the third quarter from 7% to 5%.

The US stock market closed Wednesday’s trading in the green zone. Shares of energy and financial companies, as well as technology companies, were the leaders of the growth. Dow Jones Industrial Average increased by 0.68%; S&P 500 added 0.85%; NASDAQ jumped by 0.82%. Quite possibly, this is the last wave of growth before the beginning of the correction.

The US hotels will lose $59 billion in revenue this year due to a lack of business travel. The reports for the 3rd quarter are expected to be weak.

European stock indices closed in the red zone yesterday. The British FTSE 100 index decreased by 0.25%; the German DAX lost 0.7%; the French CAC 40 decreased by 1%; the Spanish IBEX 35 lost 1.65%; the Italian FTSE MIB decreased by 1%. Weak statistical data from Great Britain and China were the triggers for the fall. The European Commission announced the plans to create a new “ecosystem” for chip production to keep the EU competitive and self-sufficient after the global semiconductor shortage demonstrated the danger of relying on suppliers from Asia and the United States.

The semiconductor shortage is decreasing platinum-group metal prices as investors are preparing for a long-term auto manufacturing crisis.

The US crude oil inventories have been decreasing for the sixth week in a row, and gasoline inventories fell to their lowest level since November 2019. Amid such shortages, oil showed an increase in prices yesterday. The threat of a new hurricane in Texas also contributed to the rise in prices.

In China, construction investment decreased by 3.2%, and the retail sales index decreased to 2.5%. The China Evergrande Group debt crisis is also putting pressure on the quotes. As a result, major stock indexes are declining in Japan, China, and Hong Kong. Macau casino stocks are falling as Chinese officials tightened control over the gaming center.

China urged the US, Britain, and Australia to “shed their Cold War mentality and ideological prejudices” after, on Thursday, they announced a new security pact that involves an 18-month plan to provide Australia with nuclear submarines. Although none of the leaders mentioned China, there are many of those who understand the pact to be a response to Beijing’s expansionism and aggression in the South China Sea and toward Taiwan.

New Zealand’s GDP increased to 2.8%. The data was better than economists’ expectations and increased the probability of an interest rate hike in the near future. But home prices are growing rapidly, despite the government reform. Australia’s unemployment rate fell to 4.5% (previous – 4.6%).

Main market quotes:

  • S&P 500 (F) 4,480.70 +37.65 (+0.85%)
  • Dow Jones 34,814.39 +236.82 (+0.68%)
  • DAX 15,616.00 −106.99 (−0.68%)
  • FTSE 100 7,016.49 −17.57 (−0.25%)
  • USD Index 92.49 −0.13 (−0.15%)

Important events for today:

  • New Zealand GDP (q/q) at 01:45 (GMT+3);
  • Australia Employment Change (m/m) at 04:30 (GMT+3);
  • Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
  • ECB President Christine Lagarde’s Speech at 15:00 (GMT+3);
  • US Retail Sales (m/m) at 15:30 (GMT+3);
  • US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+3);
  • US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
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