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What’s happening: US stocks settled lower on Thursday, following the release of economic data.
What happened: Economic data released on Thursday signalled strength in the US labour market, while producer prices showed a rise in inflation.
Federal Reserve Chairman Jerome Powell made his first appearance since the central bank cut its benchmark interest rate last week.
Why it matters: The US Labor Department reported on Thursday that initial jobless claims in the country had fallen by 4,000 to 217,000 for the latest week. The figure came in better than market estimates of 223,000. Outstanding unemployment claims declined by 19,000 to 1,873,000 in the final week of October.
In the latest reading on inflation, the producer price index for final demand rose by 0.2% in October, accelerating from a 0.1% rise in the previous month. In the 12 months through October, the index rose 2.4% last month, up from a 1.9% climb in September. Core producer prices, which exclude food and energy costs, increased by 0.3% in October, versus a 0.2% rise in September.
The latest inflation reading followed Wednesday’s CPI data release, which showed consumer prices rose last month amid higher shelter costs.
In his first appearance since the Fed cut interest rates, Jerome Powell said that the path to controlling inflation would be “sometimes bumpy.” He added that the economy was not “sending any signals that we need to be in a hurry to lower rates.”
Powell’s comments impacted risk sentiment, sending US stock indices lower. Markets still widely expect the Fed to cut interest rates by 25 bps at its December meeting.
Stocks on the Wall Street had been climbing since Donald Trump’s win in the US Presidential elections. The markets were due for a correction and stocks were shed on profit taking. Investors still support assets that are widely seen as benefiting from Trump’s policies.
The Dow Jones index fell 207.33 points, or 0.47%, to close at 43,750.86, while the S&P 500 declined by 0.60% to settle at 5,949.17 and the Nasdaq 100 dipped 0.66% to finish at 20,896.67 on Thursday.
European stock indices recovered on Thursday, after hitting three-month lows on news of Trump being elected as the next US President. Energy and tech stocks climbed on Thursday on strong earnings releases by companies. The STOXX Europe 600 Index gained 1.08% to close at 507.03.
What to watch: Investors await the release of economic data on retail sales, industrial production, import and export prices from the US today. Retail sales in the US, which rose 0.4% in September, are expected to increase by 0.3% in October.
Analysts expect export prices in the US to decline by 0.1% in October, following a 0.7% fall in September, while import prices are projected to decline by 0.1% in October. Industrial production in the US is expected to contract by 0.3% in October.
Context: The GBP/USD forex pair declined to its lowest level since early July on Thursday, amid continued gains in the US dollar.
Details: The US dollar extended gains after Donald Trump won the US Presidential election, exerting pressure on the GBP/USD forex pair. Markets expect the higher trade tariffs promised by the new President to fuel inflation, which could slow the pace at which Federal Reserve cuts interest rates.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.2% to 106.67 on Thursday.
The GBP/USD forex pair fell to 1.2667 on Thursday, after declining to its lowest level since July 2. The EUR/GBP remained almost flat at 0.8314 during the session.
The FTSE 100 gained by 0.51% to close at 8,071.19, while the more domestically focused FTSE 250 climbed 0.8% to settle at 20,522.81.
What to watch: Data on GDP growth, industrial production and balance of trade will be released today. The UK economy, which grew by 0.7% year-over-year in the second quarter, is expected to expand by 1% in the third quarter.
Analysts expect industrial production in the UK to grow 0.1% in September, slowing from a 0.5% rise in August. The UK’s trade deficit is projected to narrow to £0.4 billion in September, from £0.96 billion in the previous month.
Other Markets: Asian indices closed higher this morning, with Japan’s Nikkei 225, China’s Shanghai composite index and Hong Kong’s Hang Seng up by 0.66%, 0.18% and 0.53%, respectively.
Saudi Crown Prince Mohammed bin Salman Al Saud and Russian President Vladimir Putin discussed developments related to the ongoing war with Ukraine. The news sent the RUB/USD pair higher in forex trading this morning.
China’s industrial production rose by 5.3% year-over-year in October, slowing from the 5.4% growth recorded in the previous month. The latest reading felling short of market expectations of 5.6% exerted pressure on the CNY/USD forex pair.
Japan’s economy expanded by an annualised rate of 0.9% in the third quarter. This marked a notable slowdown from the 2.2% growth in the previous quarter, which sent the JPY/USD pair lower in forex trading this morning.
New Zealand’s BusinessNZ Performance of Manufacturing Index fell to 45.8 in October, from 47.0 in September, exerting slight pressure on the NZD/USD forex pair.
The Bank of Mexico slashed its benchmark interest rate to 10.25% at its latest meeting, sending the MXN/USD pair lower in forex trading this morning.
Germany’s wholesale prices, UK’s business investment, goods trade balance, manufacturing production, business investment, construction output and labour productivity, France’s inflation rate, Italy’s inflation rate and balance of trade, India’s bank loan growth, foreign exchange reserves and deposit growth, Canada’s manufacturing sales, new motor vehicle sales and wholesale sales, US NY Empire State manufacturing index, capacity utilization, manufacturing production, business inventories, Baker Hughes crude oil rigs and Baker Hughes total rigs, as well as Turkey’s central government budget balance.
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