Back in the world of real news, inflation expectations among Americans have jumped again, with people expecting the price of food, gasoline and rent to keep rising.
A survey released by the New York Federal Reserve shows that US consumers expect inflation to be 5.2% in a year’s time — an increase of 0.3 percentage points. That’s the tenth consecutive monthly increase and a new series high.
Medium-term inflation expectations have also jumped by 0.3 percentage point to a new series high of 4.0%.
This is sharply above the Fed’s target of 2% inflation (alongside its second goal of maximum employment).
The NY Fed also reports that expectations about year-ahead price changes jumped by 0.8 percentage point for food (to 7.9%), increased by 0.2 percentage point for rent (to 10.0%), and increased by 0.2 percentage point for medical care (to 9.7%).
The expected price of college education decreased by 0.5 percentage point (to 7.0%). The median one-year-ahead expected change in the price of gas increased by 1.1 percentage points to 9.2%.
Federal Reserve officials are watching these inflation expectation reports, as they look for evidence whether the jump in prices under the pandemic will be temporary, or is becoming entrenched.
Rising inflation expectations, and rising prices, could spur the Fed into starting to taper its stimulus programme before the end of this year — although policymakers are also assessing the Delta variant’s impact on the jobs market.
That fake press release has now been deleted from GlobeNewswire. But in the meantime….
A fake press release which wrongly claimed US retail giant Walmart has formed a cryptocurrency partnership has caused confusion in the cryptocurrency world.
Cryptocurrency litecoin initially surged after the fake press release, carried on GlobeNewswire, which stated Walmart would let customers use cryptocurrency for payments was picked up by several news organisations.
But the rally quickly fizzled, with prices slumping as it became clear that the information was untrue.
In the meantime, some traders will have lost money falling for this hoax – unlike whoever sold at the brief peak….
Other crypto coins were caught up in the confusion too.
As Bloomberg explains:
Litecoin — which rose as much as 33% at one point — erased all its gains. Bitcoin, the largest digital asset, was down 2.9% as of 10:24 a.m. in New York after earlier having advanced roughly 4% on the news. Other digital assets also retreated, with Bitcoin Cash, Ether and EOS all declining.
A Walmart spokesperson said the statement on Litecoin was “inauthentic.” Meanwhile, a verified Litecoin Twitter account deleted a tweet that linked to a press release announcing the partnership.
European markets are also holding their gains, with the FTSE 100 index up 52 points or 0.75% at 7081 points.
Fawad Razaqzada, market analyst with ThinkMarkets, says markets are bouncing back on both sides of the Atlantic after last week’s falls.
But he cautious that investors are still anxious:
Energy stocks were leading the gains, as crude oil reached a six-week high. Short-covering probably aided the rally in what is a data-void first day of the week.
The German DAX was up a cool 1.4%, leading the charge in Europe. In FX, the dollar rose, while the euro slipped, along with safe-havens Swiss Franc and Japanese yen. Gold and cryptocurrencies fell further. Crude oil was up sharply again, after a record production slump in the US – due to adverse weather – more than offset China’s decision to release crude from its strategic reserves.
It is worth observing price action closely this week. Given last week’s falls for major indices, it could be that today’s stronger start could be faded later in the day or week, as trapped bulls exit their trades or fresh selling takes places at better levels.
Sentiment has not been too great of late. Stagflation has been the key talking point amid weakening data from the US and rising inflationary pressures. Indeed, the Citi US Economic Surprise index has been falling consistently and has now reached its the lowest since June 2020.
A stock market correction may be coming… but it doesn’t seem to be coming today.
Stocks have opened higher on Wall Street, as investors try to recover ground after the worst week since June.
The Dow Jones industrial average has gained 207 points in early trading, or 0.6%, to 34,814.
The S&P 500 is trying to bounce back from a five-day losing streak, up 14 points or 0.3% at 4,473.
But the tech-focused Nasdaq is lagging, dipping by 0.05%.
Energy stocks, financial companies, and real estate companies are the top performers, while consumer discretionary and healthcare stocks are lagging.
A fifth of market professionals polled by Deutsche Bank said they still haven’t returned to their offices since the pandemic began.
That rises to a third of respondents in the US, where the Delta variant has slowed the return to the workplace.
Currently, 18% of those polled say they’re now working in the office five days a week, while 25% are still only working from home, despite the easing of restrictions in some countries.
And looking ahead, traders are most likely to be back in the office every day once the pandemic is over, while most economists expect to working from home at least past of the week:
Deutsche Bank’s survey also found that few global investors expect new full-scale lockdowns before the end of the year.
Around 44% expect restrictions to remain roughly as they are, and a third expect some further restrictions:
Many investors are now expecting an equity market correction of up to 10% by the end of the year — as caution over the bull market rally growth.
Deutsche Bank’s latest survey of over 550 market professionals across the world, published this morning, has found that 58% expect a correction of between 5% and 10% by the end of 2021.
One in ten are bracing for a steeper selloff, while nearly a third think the markets will reach 2022 without a tumble.
2021 has been a very strong year for the markets, with America’s S&P 500 up over 18% since the start of January, and Europe Stoxx 600 gaining 17%. The UK’s FTSE 100 has lagged, but is still up over 9%.
Central bank stimulus, government spending, and optimism that vaccines will spur a strong recovery have helped global markets almost double since the crash of March 2020.
A 10% correction would still leave most of the pandemic-gains intact, after a rally which has pushed stock-market valuations very high on most historical measures.
The risk of new variants of Covid-19 that bypass vaccines is the biggest risk to market stability, Deutsche Bank’s survey found. However, the vast majority of respondents expect that current dose vaccines will still prevent at least severe cases of Covid.
That’s followed by concerns about rising inflation, a weaker-than-expected recovery, and worries that central banks could make a policy error (such as ending stimulus too quickly).
Geopolitics, the risk of a tech bubble bursting, and rising debt burdens also feature on the list of concerns:
Looking ahead, a net 14%* of investors predicted that the S&P 500 index will be higher in 3 months, the second lowest reading in a year [* showing that more expect it to be higher, rather than lower].
And they remain optimistic about the longer-term, with a solid majority expecting US and European equities to be higher in a year (a net balance of over 40%)
Marketwatch published a good piece on this issue over the weekend – here’s a flavour:
Stock-market valuations are “historically extreme” by almost every measure. And while valuation corrections don’t necessarily result in market pullbacks, the risk of a “hard” correction is growing, warned a top Wall Street strategist.
“With the current cycle advancing very quickly, the risk that the correction is hard is growing,” wrote Binky Chadha, chief strategist at Deutsche Bank, in a Thursday note.
The warning comes as Wall Street firms have expressed nervousness as equities continue to rally, pushing major indexes to all-time highs, without any significant pullbacks. Including Friday, the S&P 500 has gone 214 trading days without a 5% pullback, rising more than 33% over that stretch. That’s the longest run without a pullback since a 404-day run that ended on Feb. 2, 2018, according to Dow Jones Market Data.
Visits to UK retail destinations fell by 4.2% last week, as the end of the summer holiday break hit shopping.
Retail tracking group Springboard reports that footfall fell particularly sharply in coastal areas, which had received a boost from domestic tourists.
- The greatest declines occurred in shopping centres that saw a decline of -7.7%, and retail parks that saw a decline of -4.7%, whilst footfall dropped by -2.2% in high streets
- Whilst footfall dropped by -10.4% in coastal towns, it rose by +2.6% in market towns and in by +3% in Outer London
- Across Central London as a whole footfall dropped by -7.8% but Springboard’s “Central London Back to Office Footfall Benchmark” showed a rise in footfall of +4.2%
Diane Wehrle, Insights Director at Springboard, explains:
“If any evidence is required as to the relevance of footfall as an indicator of consumer activity it was provided by the results for last week; the commencement of the school term and the return to work of those who had been on holiday led to a decline in footfall across all retail destinations last week from the week before, with a far greater drop in activity in coastal towns which had been visited by many for staycations and daycations over the summer.
In contrast, footfall rose from the week before in both Outer London town centres and in Market Towns whilst declining in both Central London and in regional cities outside of the capital, demonstrating that the majority of employees continue to work from home.
Working at home is clearly supporting high streets generally, with a decline in high street footfall across the UK last week from the week before that was less than a third of that in shopping centres and half that in retail parks.
There are also signs that the drift back to offices might have commenced, Wehrle adds:
Springboard’s “Central London Back to Office Footfall Benchmark” (which comprises only those locations in areas with offices rather than retail) showed a rise in footfall last week from the week before whilst across Central London as a whole footfall declined.”
Shares in the Chinese technology company Alibaba have fallen sharply after reports said regulators wanted to break up Alipay, the payments app with more than 1 billion users owned by Jack Ma’s Ant Group.
Beijing is seeking to create a separate app for the company’s highly profitable loans businesses, in the latest crackdown on China’s technology sector by the state’s authorities.
Chinese regulators are reportedly concerned at the financial risk building in the economy; Alipay’s loans business helped issue about 10% of the country’s non-mortgage consumer loans last year.
Regulators have already ordered Ant Group to separate the back end of its two lending businesses, Huabei and Jiebei, from the rest of its financial offerings.
Beijing wants the two businesses to be split into a separate independent app, while also requiring Ant to share user data to a new credit-scoring joint venture that would be partly state-owned, according to the Financial Times. State-owned companies in Ant’s home province, including the Zhejiang Tourism Investment Group, would hold a majority stake in the new joint venture.
The news sent shares in Alibaba down as much as 6% in trading on Monday as the wider Hang Seng Tech index, which tracks China’s biggest tech groups listed in Hong Kong, fell more than 3% over investor concerns about the latest crackdown.
Here’s the full story: