A pedestrian passes a Wall Street subway station near the New York Stock Exchange (NYSE) in New York, U.S., on Monday, June 27, 2022. Money managers betting on a sustained global rebound will be left sorely disappointed in the second half of this crushing year as a protracted bear market looms, even if inflation cools. Photographer: Michael Nagle/Bloomberg via Getty Images
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This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Consumer prices higher than expected
The U.S. consumer price index, a closely followed inflation gauge, increased 0.4% on the month in September and 3.7% from a year ago. That’s more than the expected 0.3% and 3.6% rise, respectively. Core CPI, which excludes volatile food and energy prices, increased 0.3% on the month and 4.1% on a 12-month basis, both in line with expectations.
U.S. markets lower, Asia’s gloomy start
The three main U.S. stocks gauges fell Thursday, pressured by rising Treasury yields as data showing persistent U.S. inflation sparked worries of interest rates remaining higher for longer. Asia-Pacific markets fell as investors digested China’s trade and inflation data. The benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks fell more than 1%.
Bank earnings kick off
American banks are closing out another quarter in which interest rates surged, reviving concerns about shrinking margins and rising loan losses — though some analysts see a silver lining to the industry’s woes. Earnings season kicks off Friday with reports from JPMorgan Chase, Citigroup and Wells Fargo.
China trade and inflation
China reported a smaller-than-expected drop in exports in September compared to a year ago, customs data released Friday showed. Imports missed economist’s expectations. Consumer prices were flat in the same month, while the producer price index saw annual declines slow for a third month — pointing to an uneven post-Covid recovery that may require more policy support.
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The bottom line
Investors digested a hotter-than-expected consumer prices report on Thursday but as the needle on the clock ticks ahead, focus today will squarely be on earnings season, soon to be kicked off by some of the biggest Wall Street lenders.
Data from the Labor Department showed September consumer price index rising 0.4% month-on-month and 3.7% from a year ago, above respective forecasts for 0.3% and 3.6%. They were mainly driven by higher rents. This pushed U.S. markets lower, renewing fears of what lies next for the Federal Reserve, which has stuck to its goal of 2% inflation.
In theory, it doesn’t look difficult to achieve, but in practice it could be harder. “You need a recession,” said Steven Blitz, chief U.S. economist at GlobalData TS Lombard. “You’re not going to magically get down to 2%.”
China’s economic data released Friday highlighted its lackluster post-pandemic recovery. The next question is whether fiscal support is enough to shore up the world’s second largest economy.
“The recovery of domestic demand is not strong, without a significant boost from fiscal support,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. “The damage from the property sector slowdown on consumer confidence continue[s] to weigh on household demand.”
But the next catalyst for markets will obviously be the third quarter earnings season, with banks including JPMorgan Chase, Citigroup and Wells Fargo slated to report quarterly results later in the day. Bank stocks have been intertwined closely with the path of borrowing costs this year and higher rates are expected to increase losses on banks’ bond portfolios and contribute to funding pressure.
Investors may now want to take a deep breath to brace themselves before the barrage of earnings reports take markets by storm. And who could forget about another Federal Reserve meeting by the end of the month?
