Daily Alert – Tuesday 12th October 2021: Inflation fears stalk the markets

Mark NugentDaily Alert, Oct 2021

Daily Alert – Tuesday 12th October 2021: Inflation fears stalk the markets

Equities took another turn down yesterday as fears of non-growth inflation worried the markets. This caused the US 10-year bond yield to rise and equities to fall. Normally, equities and the 10-year yield are positively correlated, but when there is no economic growth, the downwards pressure on equities of the prospect of interest rate hikes (to combat inflation) are not balanced by the boosting effect of economic growth, hence the fall in equities and the current inverse correlation between the 10-year yield and equity pricing.

In terms of trading, nothing looked appealing to me last night. Equities showed no sign of reversing. Oil, although up on the day, saw significant selling before the close of the daily candle. The JPY’s move down was difficult to explain and generally, currencies were not playing ball. As always, we are looking for multiple reasons to get into a trade that also outweigh the reasons to not trade. I was not seeing that, so I did nothing.

It’s a sparse calendar today with the next significant event being US inflation and FOMC Minutes tomorrow. Of course, we could still see a strong statement of market sentiment notwithstanding the sparse calendar.

We’ll be back tomorrow.

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