US Session (10/21/2021)
As investors digested a slew of company reports amid rising inflation predictions, US equities soared to an all-time high for the seventh day in a row.
Consumer discretionary shares led the benchmark index higher, erasing losses in the final hour of trade, as firms such as Tesla, Pool and Tractor Supply reported better-than-expected earnings.
A strong start to the earnings season has helped to alleviate inflation fears. The S&P 500, on the other hand, has been pulled down by shares of firms that have failed projections for most of the day.
Investors have done little to reward the majority of S&P 500 companies that have so far outperformed expectations while punishing those that have fallen short.
Market-implied inflation estimates for the next half-decade have risen to their highest level in 15 years, as more investors lose faith in the Federal Reserve's narrative that increasing prices are "transitory."
As traders upped their wagers on the Fed tightening policy sooner than expected, the five-year bond yield surged above 1.21%, the highest since February 2020. Strong economic reports bolstered forecasts. Unexpectedly, the latest unemployment claims number fell to its lowest level since March 2020. In September, sales of previously owned homes in the US increased by the most in a year.
Meanwhile, Democrats in Congress dispute on both the tax and spending portions of Biden's economic package.
Traders will be braced for volatility as equities reach new highs, while also keeping a careful eye on company margins, pricing power, and outlooks.
Crude oil prices plummeted, the dollar gained ground versus its peers, and bitcoin slid from its all-time high.
Asia Session (10/21/2021)
Asian stocks held steady buoyed by reports that indebted developer China Evergrande Group may meet a key payment deadline.
Treasuries recovered from a drop caused by inflation fears.
Equities advanced in China, Hong Kong and Japan.
According to local media, Evergrande transferred interest on a dollar bond prior to the end of a closely watched grace period. The report caused the yen to fall, the offshore yuan to rise, and the Australian dollar to strengthen. Concerns have been raised about the possibility of contagion from the firm's default.
The S&P 500 rose to a record overnight, but the mood soured after the cash session when Snap Inc., the owner of the Snapchat app, fell on a tempered earnings outlook, weighing on other technology shares in late trading.
Nasdaq 100 futures retreated, while S&P 500 contracts were little changed.
The 10-year US treasury yield pared a climb but remains higher for the week.
The Federal Reserve is nearing a reduction in its bond-buying programme, and traders are increasing their bets on rate hikes to alleviate price pressures.
Market implied expectations for inflation have hit multiyear highs.
The dollar fell.
Europe Session (10/21/2021)
Most equities dipped on Thursday as investors assessed corporate earnings, rising inflation, and the future for China's real estate sector. Treasuries and the dollar were little changed.
Tesla slumped in pre-market trade as the company beat analysts' profit estimates but fell short on revenue. European vehicles also fell as Volvo warned that the worldwide semiconductor shortage and supply-chain difficulties would continue to limit truck production.
In Asia, the struggling China Evergrande fell due to a worsening liquidity crunch, while other developers gained because regulators stated their funding requirements had been met.
Friday FX Options Expiries
USD/JPY: 111.50 ($750M), 113.50 ($585M), 114.25 ($560M)
EUR/USD: 1.1600 (EU802.6M), 1.1650 (EU707.3M), 1.1400 (EU359.1M)
AUD/USD: 0.7170 (AUD680M), 0.7090 (AUD680M), 0.7030 (AUD680M)
USD/CAD: 1.2525 ($596M), 1.2800 ($439M), 1.2700 ($430M)
USD/CNY: 6.4000 ($380M)
USD/BRL: 5.1000 ($386.4M), 5.7000 ($360M)
EUR/GBP: 0.8565 (EU335.6M)
NZD/USD: 0.6940 (NZD383.3M)
GBP/USD: 1.3700 (GBP557.7M)