By
Steve Muchoki
November 28th, 2023
A major menace that seems to be plaguing most countries at the moment is the inflationary surges, a move that is also billed to have a massive impact on the global stock outlook if not handled appropriately moving forward.
While many global stock indices are performing with a bullish bang, market investors are refusing to get too excited as the earnings season draws near. While the US market is closed for a public holiday, European stocks edged higher today as market stakeholders are paying close attention to the US Federal Reserve policymakers who entered a quiet period ahead of their meeting next week.
STOXX Europe 600 (INDEXSTOXX: SXXP) is up 0.59% to 483.99, the German DAX Index Performance (INDEXDB: DAX) also edged upward to 15,939.42, atop a 0.35% growth. The MSCI World Index which captures large and mid-cap representation across 50 countries also saw a 0.1% growth on Monday.
The People’s Bank of China (PBoC) shocked the investing world when it cut back on the interest rate for 1-year loans. This move, alongside the report of the impressive growth performance of the Chinese economy in 2021 sent key indices in the country up with gains. The Shanghai Composite, SSE Composite Index (SHA: 000001) grew 0.58% to 3,541.67, the Shenzhen Component, SZSE Component Index (SHE: 399001) recorded a 1.51% growth to 14,363.57.
The global stock market is also anticipating the first rate hike from the US Federal Reserve which may come as early as much and is likely to be announced at the forthcoming policy meeting slated for January 25 to 26 this month. While feedback from this meeting is well watched out for, the resilience of corporate entities as will be observed in their earnings release may further help cushion potential bearish growth shocks the broader financial world may experience in the near term.
“One thing that was a very positive surprise for us last year, particularly towards the end of the year, was the strength of corporate margins,” Veitmane said. “Corporates were able to pass higher costs to the end consumer and that was really encouraging news for us. That’s exactly what we’ll be looking for this time around.”
Inflation and the Global Stock Outlook
A major menace that seems to be plaguing most countries at the moment is the inflationary surges, a move that is also billed to have a massive impact on the global stock outlook if not handled appropriately moving forward.
The 10-Year Treasury Yield has continued to rise, hitting a two-year high last week with the implied yield from futures rising to 1.85% early on Monday.
“Inflation is high, markets expect central banks to be much more aggressive and interest rates going higher, but what we’re seeing is that the yield curve is not steepening,” State Street’s Veitmane said. “What that means to me is that markets expect the hiking cycle to start faster but to be quite shallow, and I think that’s really key for equity markets.”
Beyond the US, Japan’s Central Bank’s policy meeting will be ending on Tuesday with key economic policies on track to be unveiled. Central Banks around the world are notably fast-tracking their approach to cushion the potential fallout from precautions being taken about Omicron.
