Rising inflation expectations impact global equities - Market Overview

Rising inflation expectations impact global equities  -  Market Overview

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.

This information/research prepared by Miguel Ruiz (“the research analyst”) does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.

The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.

JME Financial Services (Pty) Ltd trading as ZA.CAPEX.COM acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via ZA.CAPEX.COM, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15. Magnasale Trading Ltd is the principal to the CFD purchased by investors