Consolidating Stock Market Amid Macro Data ?

the United States, heightened concerns about the U.S. government shutdown may also have affected investor sentiment last week. The benchmark 10-year Treasury note yield rose above 4.6% on Wednesday. However, the 10-year Treasury yield edged lower as the euro zone and the United States released encouraging inflation data.

Dow Jones closed at -0.47%, S&P at -0.27% & Nasdaq at +0.14%.

In Europe, inflation data estimates also show core rates falling to 4.5% from 5.3%. Inflation in the euro zone is falling to its lowest level in two years. German 10-year government bond yields rose to nearly 3% but fell back to that level on Friday. Italian bond yields also rose on concerns that the government will have to increase debt issuance next year to finance a larger deficit.

The CAC 40 Index slid 0.69%, DAX declined 1.10%, FTSE MIB fell 1.16% & the UK’s FTSE 100 Index lost 0.99%.

In Japan, concerns that U.S. interest rates could remain high for an extended period of time and rising oil prices weighed on sentiment. However, investors welcomed the announcement of a new economic stimulus plan by the Japanese government. The yen is weakening to an 11-month low, fueling speculation that the Bank of Japan may intervene.

Japan’s stock markets fell, with the Nikkei down 1.7% and the broader TOPIX Index declined 2.2%.

CHART OF THE WEEK

The Return Of Commodities ?

Commodities have rallied recently. This has led to speculation that we may be in the early stages of a "super-cycle"; a sustained period of growing demand exceeding supply. Supply shortages and geopolitical events have placed upward pressure on some commodity prices. At the same time, the global economy is slowing following one of the fastest and strongest rises in global interest rates in modern financial history.

Over the longer term, the "green revolution" will continue to increase demand for some of the key commodities needed to implement it, and the ESG "hysteria" is leading to reduced investment in commodities as they become "persona non grata", even though commodity prices have risen substantially. It is difficult to say whether we are in the midst of a new "super-cycle", but what is certain is that the ingredients are currently in place, not least the current high inflation environment, which usually benefits real assets such as commodities.

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