Week in a Glance: US Without Default, Weak NFP & Energy Crisis

11 ott 2021

Last week, financial markets focused on the same events: a potential US default, the energy crisis and the future of US monetary policy.

It is impossible to say that at the end of the week one of these stones was removed from the soul, but the markets still received some reasons to calm down. We are talking about voting in the Senate for an increase in the ceiling of public debt by 480 billion. The US default has been canceled for now. Well, or rather, it is postponed from October 18 to December 3, because this measure is temporary. But the markets took the information as if all the world's problems had been solved.

The energy crisis reached its peak (current) last week, when gas prices in Europe soared to almost $ 2,000, but then fell to almost $ 1,000 per thousand cubic meters within a few hours after Putin said that Russia was ready to increase gas supplies to Europe. The sharp decline in prices was another reason for the growth of optimism in the stock markets. But again, the joy, in our opinion, is more than premature, simply because the crisis has not yet gone anywhere.

Friday data on the US labor market came out rather strange. The figures for NFP turned out to be a frank failure - again many times worse than the forecasts and figures from the ADP. On the other hand, unemployment has been steadily declining, while hourly wages have grown no less steadily, confirming that inflation is not going anywhere in the foreseeable future. Based on these data, the Fed still has room for maneuver. In the sense that you can continue to cover your inaction with weak data on NPP. At the same time, more and more central banks (last week Poland, New Zealand, Iceland) raise rates, explaining this by a sharp increase in inflationary pressure.

In this light, the figures on consumer and industrial inflation in the US, which will be published this week, may be decisive for the Fed.

In general, the coming week will be extremely rich in various kinds of macroeconomic statistics from the United States (inflation, retail sales), China (trade balance, retail sales), Great Britain (labor market, GDP, industrial production). In addition, the US reporting season kicks off. Traditionally, banks are the first to report. After the super-successful two previous quarters, there are questions about the third - whether it will be able to continue the established trends, how the inflation and the energy crisis will affect the financial results, as well as problems in global supply chains.