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Week Ahead: October 11, 2021

Fawad Razaqzada Fawad Razaqzada 11/10/2021
Week Ahead: October 11, 2021 Week Ahead: October 11, 2021
Week Ahead: October 11, 2021 Fawad Razaqzada
With North American banks closed for holidays in the US and Canada, you would think there will be minimal movements in the markets today. While that might be the case for some markets, that’s not to say it has been quiet everywhere. Indeed, the Japanese yen has sold off sharply again with commodity dollars firming up and crude oil hitting fresh multi-year highs in the first half of today’s session. Bond yields climbed higher, reflecting investors expectations that the central banks will tighten their policies in the months ahead in order to control inflation from spiralling out of control. Unsurprisingly, Nasdaq futures traded lower, along with some European indices.
 
The overall behaviour of the markets suggests the appetite for risk is not quite there, yet it is not full-on risk-off either. Yields have risen on inflation fears, but this has not harmed risk assets across the board. In other words, it is the “reflation” trade dominating the agenda rather than risk-off. But sentiment could turn negative very quickly, so don’t be fooled by the apparent calmness. Among other things, the energy crisis is one of the biggest risks facing investors right now. But there are also tapering fears, stagflation risks and not to mention Evergrande.

Keep an eye on rising yields – if we see an acceleration in the rally then it could ignite fresh selling for stocks. Here’s the UK 10-year yield chart:

Uk 10y bond yields
 
Meanwhile, the economic calendar is fairly quiet today, but things will pick up later in the week.
 

Looking ahead

 
Friday’s US jobs report disappointed on the headline front, but other aspects of the report as wages growth and unemployment rate both beat expectations. More importantly, the markets reacted as if to suggest the jobs report made no difference in terms of expectations about Fed’s tapering timeline.
 
Tuesday
 
  • Chinese trade figures
  • UK average earnings and jobless claims
  • ZEW surveys for Germany and Eurozone
 
A few other Bank of England policy makers have become vocal about inflation risks. A couple of BoE officials have said inflation is proving to be hotter than expected and likely to persist longer than expected. If we see wages data catch up with inflation, then the BoE will have even less reason to keep current policy. The pound will remain in focus on Tuesday as investors respond to the latest wages and employment data.
 
Wednesday
 
  • UK data dump including construction output, manufacturing production and monthly GDP estimate
  • US CPI
  • FOMC meeting minutes
On Wednesday we will get to find out exactly how hawkish they Fed was at its previous meeting and whether they were already making plans about tapering QE in November.

We will also get the latest inflation data from the world’s largest economy. CPI has already surpassed the Fed’s target and overshoot all sorts of expectations. If we see another sharp rise in prices this might trigger concerns that the Fed will taper QE faster than would ideally be the case. Stocks could drop and yields might jump if this is the case.
 
Thursday
 
  • Australian employment report
  • Chinese CPI
  • US PPI and jobless claims
Friday
 
  • US retail sales, Empire State Manufacturing Index and UoM’s consumer sentiment and inflation expectations indices.
Stagflation concerns have been rising in recent weeks as inflationary pressures have been growing with energy prices surging etc. If the UoM survey show consumer inflation expectations have risen while sentiment towards the economy has dropped, this will provide hard evidence about the risks of stagflation.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
×
Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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