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Rising inflation expectations impact global equities - Market Overview

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The stock markets are beginning to feel threatened by rising inflation expectations worldwide. The weak labor market data might convince the Fed to make a move to control inflation spikes.

Added to this is the increase in commodity prices. For example, Copper is trading at its highest levels in history. Problems in the supply chains that have caused a shortage of manufacturing components have led to increasingly high prices.

Elsewhere, U.S. Treasury Bonds yields are stable, with the 10-year benchmark trading around 1.60%. However, if inflation surges, the markets expect yields to resume their upward path, negatively impacting the stock markets.

Stock markets feel the shocks.

Yesterday, the pressure started to pile up in the tech sector, slowly taking over other major industries. In the early morning, the Asian stock markets were also affected by the selling pressure.

Tomorrow, U.S.’ CPI data is scheduled for release. If expectations are surpassed, and the report shows rising figures, then the risk aversion could increase.

Another cause for concern is related to the costs of the pandemic. The enormous government spending deployed by all countries could be reflected in tax increases that are being prepared at the government level and possibly affect the rich people.

As a result of this scenario, the Tech 100 technological index lost over 3%. For the first time in more than a year, the index began to pierce the 100-day SMA line that is now passing through the area of 13281, now acting as the primary supporting reference. Daily closes below this level could make room for bearish scenarios.

Asian stock markets have also experienced losses for the same reasons. For example, Nikkei dropped more than 3% too. Technically, it is approaching a support band located around 28,465, piercing the line of 100 days SMA.

Sources: Bloomberg, reuters.com.

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.