Global equity markets and U.S. bond yields fell. This is after the data showed inflation cooling in the Unites States, when the U.S. central bank begins tapering its asset purchases. MSCI’s world stocks benchmark fell 0.33%. All 11 major sectors in the S&P 500 ended the session lower, with energy and financials falling the most. European shares closed 0.1% lower, by dragged down by mining, banks and luxury stocks. This is followed by the Asian luxury stocks in falling on a new spike in COVID cases in China.
The U.S. Labor Department said that its Consumer Price Index (CPI) was up just 0.1% last month. In six months, this was the smallest gain, indicates that inflation has probably peaked. This aligns with Federal Reserve Chair Jerome Powell’s long-held belief that high inflation is transitory. David Petrosinelli, Senior Trader at InspereX said that today’s CPI data came in a bit weaker than expected. Inflation continues to be a key challenge for investors. And these trends indicates that the labor costs will continue to rise, and that could make inflation stickier over the long-term.
The August CPI data lifts some of the pressure the Fed faced. And the fed is going to meet next week. BlackRock’s Chief Investment Officer of Global Fixed Income Rick Rieder said that further delaying this key Fed announcement is distorting the economy and throwing off markets. Rieder, also the head of BlackRock’s global allocation team said that continuing to stimulate demand higher increases the risk of a severe supply mismatch across economic and financial assets. The prospect of a corporate tax hike in the United States from 21% to 26.5%.
Goldman Sachs Group Inc estimated that if Democrats succeed in raising the corporate tax rate increase to 25% and get half of the hike proposed in foreign income tax rates, that could shave 5% off S&P500 earnings in 2022. The oil prices ended largely unchanged, as Tropical Storm Nicholas brought heavy rain and power outages in Texas. Brent crude settled up 90 cents at $73.60 a barrel. U.S. crude ended 10 cents higher at $70.46 per barrel. Spot gold prices rose $12.7509, or 0.7%, to $1,806.24 an ounce.
