S&P500
The US stock market showed its first decline since the beginning of the month. It took place just ahead of the publication of the US inflation report.
The main indices closed with a decline. Thus, the Dow Jones Industrial Average lost 0.3%, the NASDAQ fell by 0.6%, and the S&P500 slid by 0.35%.
In the morning, the Asian stock indices also decreased. Thus, Japan's index declined by 0.6%, whereas China's index lost 1%.
Energy sector. At the same time, oil advanced by $2. Thus, Brent crude is trading above $85 per barrel, approaching this year's high of $87. The US Energy Department expects that by the end of 2021, demand for oil will total 97.5 million barrels a day, whereas in 2022, it may rise to 100.9 million barrels a day adding 3.3 million barrels. In the US, in one week, oil reserves dropped by 2.5 million barrels. Economists had expected a rise.
At the same time, at the ICE, gas prices declined by 10% to $850. It is obvious that the market is waiting for higher supplies from Gazprom or cold weather in Europe. These factors are likely to determine gas prices in the near future.
The S&P500 is now trading at the level of 4,685 within the range of 4,640-4,700.
The US inflation report for October is the main event of Wednesday. In September, inflation hit 5.4% compared to 5.3% in August. Meanwhile, core inflation, which excludes prices of food and petrol, totaled 4%. It is a more volatile indicator. Analysts suppose that in October, inflation added 0.6%, whereas core inflation grew by 0.4%. If the predictions come true, the US Fed will receive one more argument in favor of a tighter monetary policy. Today, the US will also publish its labor market report. Tomorrow, the US will celebrate its national holiday. Thus, according to the forecast, the number of first-time claims may advance to 260 thousand, whereas the number of continuing claims may reach 2.1 million.
Joe Biden extended for 1 year the ban for US companies to invest in Chinese companies related to the military sphere. In this case, money from the US will not help strengthen the military power of the main military competitor of the US and the West.
A group of 11 senators addressed Biden with a letter calling for tough measures to stabilize fuel prices in the domestic market. For example, they asked the president to ban oil exports from the United States and use its reserves.
Early this week, the Fed said that the US might face risks caused by problems in the Chinese housing sector. One of the largest Chinese companies, Kaisa, is suffering grave financial problems. The country's regulator continues introducing stricter lending requirements amid a property bubble. The crisis in the Chinese property market may influence the US financial system due to China's role in the global economy.
General Electric, one of the largest US companies, announced its decision to split into three public companies specialized in three different spheres such as healthcare, aviation, and energy. The plan will be implemented in 2023-2024.
Democrats in Congress are planning to vote on a $2 trillion infrastructure package as early as next week. However, experts believe that they will have to significantly reduce the package.
The US dollar index is at 94.0, continuing hovering between 93.70 and 94.30. The US dollar is waiting for the inflation report. It is very difficult to predict the future dynamic at the moment. Higher inflation may cause either a jump or decline in the greenback.
USD/CAD is trading at 1.2420, remaining within the range of 1.2300-1.2450. The pair unexpectedly dropped amid a $2 rise in oil prices. The pair is likely to fall to 1.2300.
Conclusion. Market participants are looking forward to the US inflation and employment reports.
