Optimism over 3rd-quarter earnings is currently outweighing inflation fears. Markets have had a strong month so far.
Bank of England Governor Andrew Bailey said that the BoE would “have to act” if inflation persists. Markets wouldn’t be surprised to see a rate increase as early as next month although data from the Office for National Statistics last week showed that UK Inflation slowed unexpectedly in September to 3.1% from 3.2% in August, even so this is well above the target of 2%. UK Producer Price Inflation increased to 6.7% as companies lift their prices as their costs rise.
Our Breadth Indicator stayed neutral and our Momentum Indicator ticked back down.
Markets pulled back in September largely on inflation concerns but have rallied back this month on encouraging 3rd Quarter earnings reports. Only about 20% of S&P 500 companies have so far reported this season but 80% have beaten estimates.
Sentiment has improved considerably since late September, intraday on Monday the VIX indicator (often called the fear gauge) fell to 14.84, the lowest since early July, clearly reflecting the current mood of the market.
This week some major tech stocks are reporting including Apple, Amazon and Facebook.
Our Breadth Indicator stayed negative and our Momentum Indicator ticked down again.
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