S&P 500 nearly tops record amid recovery bets
US equities continued their rally into a sixth day, putting the benchmark S&P 500 within a whisker of its closing high.
The S&P 500 Index gained 0.37% to 4,536.19 as traders weighed company earnings against risks from inflationary pressures. The Nasdaq Composite Index closed little changed at 15,121.68 and the Dow Jones Industrial Average climbed 0.43% to 35,609.34.
The gains come on the heels of the S&P 500’s best start to an earnings season in the last two years with the index gaining about 3.6% in the first week. Solid corporate results have helped counter concerns stemming from elevated inflation, driving stocks higher.
The yield on the 10Y Treasury note was little changed as corporate earnings have taken some of the spotlight away from concerns about stagflation – the combination of lower growth and higher inflation. Still, clouds are gathering over the economic recovery in the face of higher energy costs, global supply chain bottlenecks, and reduced central bank support.
The dollar continued to weaken against major peers on Wednesday (20 October) as traders increased bets central banks around the world will raise interest rates before the Federal Reserve to combat price pressures. Governor Randal Quarles said the Fed is not “behind the curve” with its monetary policy and said he still views current price increases as “transitory”. – Bloomberg News.
European Union (EU) countries are trying to reach agreement on ways to ease pandemic travel restrictions within and into the bloc as leaders work to boost Covid vaccination levels.
One option under discussion ahead of a two-day EU summit in Brussels is a plan to effectively scrap the traffic light system of green and red areas in the bloc that has been used to govern travel rules and instead allow anyone who has been vaccinated to travel freely, according to a European Commission informal proposal seen by Bloomberg.
The plan would rely on the use of the widely adopted EU digital Covid passports, which have allowed travellers to cross borders without tests or quarantines since the summer if they can show they have been fully inoculated or recovered from the virus. Travelers without a Covid pass could be required to undergo tests after arriving in their destination.
Other jurisdictions have begun to open up rapidly in recent weeks after a slower start, with the UK simplifying its own traffic light system to a green and red list, with the latter now featuring only seven countries as of last week (ended 15 October). The US, meanwhile, will admit vaccinated foreigners starting from 8 November, spurring demand on transatlantic routes that rank as the most lucrative for airlines and travel firms.
At the same time, there are some worrying Covid trends that could slow the push to relax the rules. Tuesday (19 October) saw the most single-day confirmed deaths in Europe since April, with the seven-day average also on the rise. – Bloomberg News.
The Stoxx Europe 600 Index gained 0.32% to 470.07 by the close in London.
Supply chain snags crimping global trade weighed on Japan’s exports last month as auto shipments plunged, weakening a key pillar of the country’s economic recovery.
Growth in Japan’s overseas shipments slowed in September to about half August’s pace, advancing 13% from last year’s level, the finance ministry reported Wednesday (20 October). Gains from deliveries of steel and chip components were muted by a drop in the nation’s key car exports. Economists had forecast a slowdown to an overall growth pace of 10.5%.
On a seasonally adjusted basis, exports fell 3.9% from the prior month, the first month-on-month drop since February.
The figures from the world’s third largest economy add to evidence that Covid-triggered supply chain bottlenecks are taking a toll on global trade. For Japan, weaker exports put more pressure on consumer spending to start driving the recovery as the country lifts virus restrictions and vaccination rates rise.
The trade slowdown is also likely to factor into new Prime Minister Fumio Kishida’s plans for more economic stimulus. Kishida has said he will unveil details of a spending package worth tens of trillions of yen after national elections at the end of this month.
Weaker exports are one reason the Bank of Japan is likely to consider cutting its growth forecast for this fiscal year in a report later this month, according to people familiar with the matter. Supply chain problems for automakers are one factor that needs consideration, they said. – Bloomberg News.
The Nikkei 225 Index slipped 0.45% to 29,124.00 on Thursday after closing 0.14% higher at 29,255.55 the previous session.
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