Mike Dolan’s A Look at the Future in US and Global Markets
The world’s two biggest economies are beating forecasts, but US economic growth is outpacing China’s expansion, in a somewhat alarming development for the Federal Reserve and bond market watchers.
With the horrors of the war in Gaza and Israel staring at the world, US President Joe Biden’s visit to the region on Wednesday is central to what happens next.
Energy prices are rebounding on fears, but global markets have turned to a flurry of economic and business updates to get their bearings despite the worrisome conflict unfolding.
A consensus of US retail and industrial data for September prompted Wall Street to once again upgrade US growth forecasts, with the Atlanta Fed predicting real-time GDP growth of 5.4% in the third quarter.
U.S. homebuilding starts are next on the agenda for Wednesday as U.S. megacaps Tesla and Netflix report third-quarter earnings and the country’s biggest banks continue to post impressive results.
China’s economy beat expectations in consumption and industrial activity in the third quarter, despite fears of a default on distressed real estate firms and annual gross domestic product growth slowed in the second half, the latest data on Wednesday showed.
But China’s year-on-year growth has appreciated compared to 2022’s Covid-related lockdowns, and its comparable annual growth rate of about 5.2% per quarter is now lower than the Atlanta Fed’s estimate for the US.
High pressure growth and US crude oil prices rising to a two-week high have reignited inflation concerns.
With US Fed futures showing a more than 50% chance the Fed will raise rates again in January, markets are anticipating an agenda packed with senior Fed officials for guidance on Wednesday – culminating in a speech by Fed Chairman Jerome Powell tomorrow.
Bond markets are once again nervous as the 20-year Treasury bond goes up for auction today. The two-year Treasury yield hit its highest level since 2006 at 5.24% on Tuesday and mostly held those gains overnight — while the 20-year yield stood at 5.2%.
Adding to global concerns about inflation, Britain reported last month that inflation did not ease as much as expected and stood at 6.7%, below the Bank of England’s 2% target – pushing up UK government bond yields again.
Despite all this, Wall Street stocks have been remarkably resilient in handling the flood of incoming earnings – with little red on Tuesday and futures trading lower than today’s bell.
Shares in Asia and Europe were also mostly higher as Chinese stocks underperformed on the back of real estate concerns and new US restrictions on investment in China’s chip industry.
The dollar was mostly steady on Wednesday.
In domestic politics, the focus is on Congress and the absence of the House Speaker ahead of the US government shutdown next month.
Right-wing Republican Jim Jordan on Tuesday asked for more time to build support for his bid for speaker, raising questions about his chances of winning on the first ballot.
Key developments that should provide additional direction to US markets later Wednesday: * US Corporate Earnings: Tesla, Procter & Gamble, Netflix, Abbott Laboratories, Morgan Stanley, Northern Trust, Nasdaq, Travelers, M&T, Citizens Financial, US Bancorp, Scions Bancorp, Discover Financial , Lam Research, Alcoa, POPG, Steel Dynamics, Crown Castle, Equifax, Kinder Morgan, Elevance * US President Joe Biden Visits Israel * US President Joe Biden Visits Israel. Federal Reserve Releases Beige Book on Economic Conditions, August DIC Treasury Data * Federal Reserve Board Governors Christopher Waller, Lisa Cook and Michelle Bowman all speak, New York Fed President John Williams and Philadelphia Fed President Patrick Harker speak * US Treasury bids on 20-year bonds
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