Daily Market Commentary 25th October 2021

Global markets tread water overnight, to close out a largely positive week. US Equities are now testing record historical highs, a product of historically high liquidity, courtesy of ‘modern monetary policy’. US Earnings season has fared well and this has served to reinforce positive US share markets. The existential threat to markets and all the asset bubbles, across the classes, is inflation and growth. This coming week will reveal inflation and growth and may confirm the descent into ‘irons’, referred to as Stagflation.

The Bank of Japan and the ECB, will meet this coming week, to decide monetary policy. Inflation has been more controlled in both of these economic zones, due mainly to the lack of growth, but PPI will impact. These Central Banks are unlikely to raise interest rates but their narrative may recognise inflation and growth concerns? US PCE, is the inflation indicator that the Fed recognises, and this will reveal a lot in the coming week. Look at the trend line, rather than the actual number. The USD settled, with the EUR trading 1.1620, while the GBP fell back to 1.3750. The energy crises enveloping Europe is being felt hardest in the UK, as they are further down the renewable energy road to perdition.

Commodity currencies have been beneficiaries of the energy crises and supply chain dislocations, with the AUD trading 0.7450, while the NZD drifted back to 0.7140. Australian inflation and NZ Business Confidence will be key economic indicators in the coming week.