ANKARA – After a tumultuous week and massive losses in September, global markets await US employment reports next week as they may shape the US Federal Reserve’s monetary policies over the coming months.
Rising inflationary pressures on global economies, rising energy prices, uncertainties in Asia among Chinese real estate developer Evergrande and the signal from the Fed to start slashing the process of cutting its $ 120 billion. dollars of monthly bond purchases have recently created high volatility. in world markets.
U.S. equity markets ended September with their worst monthly loss of 2021 to date.
While the Dow Jones fell 4.3% last month, the S&P 500 fell 4.8% for its biggest drop since March 2020. The Nasdaq fell 5.3% – its worst September in a decade.
European indices also recorded massive losses, with the STOXX index falling 3.8%, while the German DAX 30 and the French CAC 40 lost around 3.4% each, according to data compiled by Anadolu agency.
Energy prices soar
There has been a lot of uncertainty about when central banks in major economies would raise interest rates amid rising inflation and rising energy prices. However, high unemployment and weak labor market conditions continue to be significant obstacles.
Oil prices recently hit their highest level in three years as the international benchmark price for Brent crude hit $ 80.75 per barrel on Tuesday, its highest level since October 2018.
The Organization of the Petroleum Exporting Countries (OPEC) will hold its ministerial meeting on Monday.
The global oil market expects the group to discuss increasing oil production to meet the growing demand of the post-pandemic period caused by normalization.
Natural gas prices in Europe hit a new high of 100 euros ($ 116) this week, posing a risk against economic recovery and heating ahead of the winter season.
On the labor market front, unemployment in the euro area stood at 7.5% in August 2021, with unemployment in the EU at 6.8%, according to Eurostat, the EU’s statistical office .
The US unemployment rate stood at 5.2 percent in August after the world’s largest economy was able to create just 235,000 jobs that month, according to the latest figures from the US Department of Labor .
Jobs in the United States, by contrast, hit a new high of 10.9 million in July, suggesting there is an uneven recovery from the coronavirus pandemic in the US economy.
The US private payroll for September will be announced Wednesday at 8:15 am EDT (12:15 GMT), which is expected to reach 430,000, more than 374,000 in August if realized.
Non-farm wages for September will be released at 8:30 a.m. EDT (12:15 GMT) on Friday.
Employment data that the Fed is monitoring very closely is estimated at 460,000, after posting a small increase of just 235,000 in August.
Timeline of the Fed’s reduction
The US central bank is awaiting a strong job gains report to begin its downsizing process, which could begin by November or December at the latest.
Fed Chairman Jerome Powell said last week that the tapering could end by mid-2022, giving the bank about eight months to end its monthly asset purchases of $ 120 billion. of dollars if it reduced them by $ 15 billion each month.
The central bank also signaled on September 22, after its two-day meeting, that it forecast the first rate hike to come in 2022 and expects to make four more interest rate hikes in 2023, instead of his previous estimate of two made on June 16.
These expectations pushed the US dollar index, which includes a basket of currencies like the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, to soar to 94.50. on September 30, its highest level since September 2020.
The yield on 10-year U.S. Treasuries also hit 1.567% on September 28, marking its highest level since June 6 of this year.
The VIX (volatility index), known as the fear index, broke the critical level of 20 after jumping 24% in a single session on Tuesday.
High inflation persists
Inflation is expected to remain high around the world through the first half of 2022, at least until labor markets show signs of recovery.
The European Central Bank (ECB) and the US Federal Reserve are awaiting improvement in employment data before raising interest rates which could come in at the end of 2022 at the earliest, given the current weakness in the labor market.
ECB President Christine Lagarde said on September 16 that she expects the euro area economy to recover faster than expected from the coronavirus pandemic as part of a rapid vaccination.
Lagarde said on Wednesday that energy prices are expected to fall in the first half of 2022.
However, Powell said production bottlenecks and supply chain problems will continue into the next year, delaying inflation longer than previous estimates.
He also hinted that the Fed could raise interest rates to control inflation if prices rise to unsustainable levels.
Powell added that he hoped the central bank wouldn’t need to balance inflation and rate hikes, which he called a “difficult trade-off to have the two goals in tension.” (Anadolu)