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MSCI’S global equities gauge was down slightly yesterday while the dollar advanced and oil prices climbed as attacks on Saudi Arabia overshadowed hopes for supply improvements after US President Donald Trump hailed fresh Russian diesel exports and a Russia-Ukraine energy ceasefire.
While the US bond market was closed for the Columbus Day holiday, investors were cautiously waiting for September inflation data and the third-quarter earnings season, which kicks off today with earnings from major US banks.
“There’s a lot to be wary of,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management. “You’re walking down a train line and you don’t know, because it’s dark, if a train is coming and so, you know, you’re just being real careful right today.”
And besides the wait for earnings and economic data, Pavlik noted that stocks were also ‘being kept in check because of higher oil’ and a lack of direction from the bond market, which tends to influence stocks and other assets.
US Treasury yields hit 24-year highs this month as high energy costs fueled concerns that inflation could stay elevated, keeping policymakers hawkish and pressuring equity valuations.
On Wall Street yesterday morning, the Dow Jones Industrial Average rose 248.59 points, or 0.49 per cent, to 51,907.31, the S&P 500 fell 3.84 points, or 0.05pc, to 7,807.55 and the Nasdaq Composite fell 90.35 points, or 0.33pc, to 27,274.78.
MSCI’s gauge of stocks across the globe fell 0.68 points, or 0.06pc, to 1,146.58.
However, the pan-European STOXX 600 index rose 0.61pc as bank stocks gained in Europe. Also, euro zone benchmark Bund yields edged lower and French and Italian debt risk premiums fell slightly.
On the earnings front, JPMorgan and Goldman Sachs are due to report today and Bank of America tomorrow.
S&P 500 earnings are expected to climb more than 30pc in the third quarter, according to LSEG IBES, though the bulk of that is expected to come from the tech sector. STOXX earnings are expected to increase 21pc, or 9.7pc excluding the energy sector.
On the data side, rising energy costs are expected to lift the Consumer Price Index (CPI) by a hefty 0.6pc to an annual 3.7pc, though the core is seen cooler at 0.2pc and 2.5pc annually.
In currencies, the US dollar held near an 18-month high, supported by safe-haven demand as an escalating Middle East conflict kept investors cautious ahead of the inflation data.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.24pc to 102.44, with the euro down 0.23pc at $1.1175.
Against the Japanese yen, the dollar strengthened 0.23pc to 158.67.
Markets imply only a 19pc chance of a rate increase from the Federal Reserve this month, rising to a roughly 71pc chance for a hike of 25 basis points in December, according to CME Group’s FedWatch tool. Investors are also betting on hikes in the EU, Japan and Britain before the end of the year.
In energy markets, US crude rose 2.14pc to $93.82 a barrel and Brent rose to $106.95 per barrel, up 2.13pc on the day.
In precious metals, spot gold fell 0.62pc to $4,167.98 an ounce.
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