Every Friday, Brian Jacobsen provides perspective on key events and topics of the current week and his thoughts about what the week ahead may hold. Here’s his report for the week of October 2–8, 2021.

The week that was

·         Nonfarm payrolls in the U.S. in September expanded by a less-than-expected 194,000. The unemployment rate ticked down to 4.8%. Private-sector payroll gains were 317,000 for the month, so the big miss from lofty expectations could be due to seasonal adjustments affecting the local government education payroll numbers. Wages rose 0.6% month over month (+4.6% year over year). The economic recovery isn’t delayed, it’s just drawn out. A 194,000 headline number is still very good, especially since previous months’ numbers were revised higher by 169,000.

·         China has been experiencing an energy crunch with power companies facing increased demand and higher input prices. China’s government has instructed coal-mining companies to increase their output. Natural gas prices, especially in Europe, have been skyrocketing as investors worry about a shortage during winter. Norway has increased production, but Russia has not. Russia has been trying to get the European Union to approve Nord Stream 2, a pipeline that carries natural gas under the Baltic Sea. Russia-controlled PJSC Gazprom has been limiting deliveries, pipeline capacity, and storage levels, helping to push up natural gas prices. Russia’s President Putin said Russia is ready to help stabilize the energy markets.

·         Pfizer Inc. asked the U.S. Food and Drug Administration (FDA) to approve its COVID-19 vaccine for children from 5 through 11 years old. The FDA has scheduled a panel of outside experts to review the data on October 26.

 

Economics:

·         The Reserve Bank of Australia reiterated its dovish tilt from last month. The central bank kept its target rate unchanged at 0.1% and said it “will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target range.” When might that be? The policy announcement said the most likely scenario is that “this condition will not be met before 2024.”

·         The Reserve Bank of New Zealand delivered a rate hike. Policymakers there are concerned about upside inflation risks and rising home prices.

·         Poland’s central bank surprised markets by hiking its target rate by 0.4 percentage points to 0.5% in a move to front-load rate hikes and get in front of rising inflation.

·         The European Central Bank has been discussing plans to make its asset purchases more flexible. Currently, its purchases are to be proportional to the size of each member country’s gross domestic product.

·         The Reserve Bank of India surprised markets by suspending its asset purchase program.

 

Politics:

·         The Organization of the Petroleum Exporting Countries agreed to keep drip-feeding more oil into the markets. Given the rise in oil prices this year, there was speculation that the cartel would agree to pick up the pace of oil production, but no such luck. Oil prices hit a seven-year high after the news.

·         U.S. President Biden and China’s President Xi will meet (virtually) later this year to discuss tensions between the countries. China has been flying military planes over Taiwan lately while the U.S. has been training Taiwan’s military.

·         Senate leaders reached an agreement on the debt ceiling. The deal raises the debt ceiling into December by $480 billion. According to the Treasury, that should be enough to get the Treasury through December 3.

The week to come

·         Earnings reporting season begins. At the index level, companies within the S&P 500 Index are projected to have an average earnings-per-share increase of 27.20% year over year, according to FactSet. Sales are projected to rise 14.75% year over year.

·         On Monday, the Bank of Korea has a policy meeting.

·         On Tuesday, a U.S. small business optimism survey for September is coming out.

·         Wednesday is a busy day. China’s September export data and inflation data will be released. U.K. and eurozone industrial production data for August are coming out. U.S. inflation data for September is also coming out, as are the minutes from the last Federal Open Market Committee meeting.

·         On Friday, U.S. retail sales data for September and the University of Michigan’s Index of Consumer Sentiment for October are to be released.

Thanks for reading, stay informed!

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

PAR-1021-00461

0
0

You might also like: