Photo by Austin Distel on Unsplash

According to the US Department of Labor, initial jobless claims for the week unexpectedly fell to 193,000, down from 209,000 the previous week. This is the lowest level in four months. Other data showed that US real Gross Domestic Product (GDP) declined at an annualized rate of 0.6% in the second quarter of 2022. In the first quarter, real GDP was down 1.6%. Thus, the US economy has already had two official quarters of declining GDP, indicating a recession in the economy. The Dow Jones Index (US30) decreased by 1.54% at the stock market's close yesterday, and the S&P 500 Index (US500) lost 2.11%. The Technology Index NASDAQ (US100) was down by 2.07% by the end of the day.

Apple shares fell by 5% after Bank of America downgraded the company from "Buy" to "Neutral," citing concerns about slowing consumer spending. The downgrade worsened the sentiment of all semiconductor stocks. Rising Treasury bond yields, the enemy of growth sectors such as tech stocks, also added pressure to the overall market.

Cleveland Fed President Loretta J. Mester said inflation was "unacceptably high" and reiterated the Fed's willingness to return inflation to the 2% target, even if the economy slows.

Equity markets in Europe were also mostly down yesterday. German DAX (DE30) lost 1.71%, French CAC 40 (FR40) decreased by 1.53%, Spanish IBEX 35 (ES35) fell by 1.91%, British FTSE 100 (UK100) closed yesterday down by 1.77%

Germany continues accumulating gas in storage, with the occupancy level at 91.5% of capacity. But according to the German Federal Network Agency, the population is consuming too much natural gas, and it is recommended to reduce consumption to avoid shortages. In order to avoid a gas shortage this winter, consumption must be reduced by at least 20%, which is almost impossible to achieve when considering that the country's total gas consumption last week was 14.5% higher than the 2018-2021 average.

Inflation data showed yesterday that consumer prices in Germany reached their highest level in decades. On an annualized basis, the inflation rate reached 10%, up from 7.4% the previous month. In Spain, on the other hand, the numbers were more positive. Spain's annual inflation rate fell to 9.0% from 10.5%. According to analysts, the inflation data, along with 15 ECB speeches this week, bolstered expectations of a tentative 0.75% interest rate hike at the next meeting.

The Bank of England began a historic intervention to stabilize the UK economy by announcing a two-week buying program for long-term bonds and postponing planned sales of securities until late October. The bank said it would start buying up to £5 billion worth of long-term securities (with maturities of more than 20 years) on the secondary market from Wednesday until October 14. This helped stabilize the British pound.

The Russian-backed authorities organized elections in the occupied regions in eastern and southern Ukraine, which have been widely condemned as a bogus attempt to justify land grabs after recent military setbacks. The Kremlin announced Thursday that Russia is officially annexing four regions of Ukraine partially controlled by its military, a major political escalation. Kremlin spokesman Dmitry Peskov said Russian President Vladimir Putin would attend the annexation ceremony of the four Ukrainian regions on Friday. The Ukrainian Foreign Ministry called the referendums an illegal "propaganda show." The United States and its Western allies also pledged not to recognize Russia's claims to the occupied territories. During the voting, armed forces accompanied election officials who went door to door asking people to vote. The international community was concerned that Moscow might try to defend "its new" claimed territory with nuclear weapons. The US responded that any use of nuclear weapons by Russia would be met with a "catastrophic" response.

According to preliminary reports, OPEC+ countries will discuss production cuts at a meeting on October 5. Hurricane "Ian" did not touch oil production platforms on the US Gulf Coast, which caused oil prices to decline after two days of gains.

Asia's major stock indices mostly strengthened yesterday. Japan's Nikkei 225 (JP225) gained 0.95%, Hong Kong's Hang Seng (HK50) ended the day 0.49% lower, while Australia's S&P/ASX 200 (AU200) ended the day up by 1.44%.

The Chinese yuan broke an eight-day losing streak after the People's Bank of China (PBOC) warned against speculative trading and large unilateral bets on the currency. The central bank also said that stabilizing the currency market is a top priority and reiterated that the yuan has a solid foundation to be basically stable.

1. S&P 500 (F) (US500) 3,640.47 −78.57 (−2.11%)
2. Dow Jones (US30) 29,225.61 −458.13 (−1.54%)
3. DAX (DE40) 11,975.55  −207.73 (−1.71%)
4. FTSE 100 (UK100) 6,881.59 −123.80 (−1.77%)
5. USD Index 111.95 −0.66 (−0.58%)

Important events for today:

• – Japan Industrial Production (m/m) at 02:30 (GMT+3);
• – Japan Unemployment Rate (m/m) at 02:50 (GMT+3);
• – Japan Retail Sales (m/m) at 02:50 (GMT+3);
• – China Caixin Manufacturing PMI (m/m) at 04:45 (GMT+3);
• – Japan Consumer Confidence (m/m) at 08:00 (GMT+3);
• – UK GDP (q/q) at 09:00 (GMT+3);
• – Eurozone German Retail Sales (m/m) at 09:00 (GMT+3);
• – Switzerland Retail Sales (m/m) at 09:30 (GMT+3);
• – Eurozone French CPI (m/m) at 09:45 (GMT+3);
• – Eurozone German Unemployment Rate (m/m) at 10:55 (GMT+3);
• – Eurozone Italian CPI (m/m) at 12:00 (GMT+3);
• – Eurozone CPI (m/m) at 12:00 (GMT+3);
• – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
• – US PCE Price index (m/m) at 15:30 (GMT+3);
• – US FOMC Member Brainard Speaks at 16:00 (GMT+3);
• – US Chicago PMI (m/m) at 16:45 (GMT+3);
• – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3);
• – US FOMC Member Bowman Speaks at 18:00 (GMT+3);
• – US FOMC Member Williams Speaks at  3:15 (GMT+3).

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