Markets globally ended lower on the background of last week's US inflation data. These data come alongside negative corporate announcements for the third quarter. Analysts and investors expect the Fed to increase the key interest rate by at least 75 basis points at this week's meeting.
Regarding earnings, FedEx cited significant weakness in both European and Asian business activity, along with rising costs and slowing global economic growth. In addition, General Electric (GE) said supply chain challenges are likely to weigh on third-quarter results as persistent supplier constraints hamper GE's production of industrial goods.
According to FactSet, expectations for third-quarter earnings growth currently show an increase of just 3.7% year-over-year, significantly less than the 9.8% growth forecast at the end of June. Analysts also cut third-quarter earnings expectations for every S&P 500 sector except energy. Seven of the 11 sectors are now expected to show annual declines in next quarter's results.
The US CPI (consumer price index) rose more than 8% year-on-year, up from 8.5% in July. Excluding food and energy, the core CPI increased 6.3% and accelerated from the previous month. General and core inflation came in higher than expected. However, price pressures are showing declines in several categories such as gasoline, airline tickets and used vehicles. Foods were up over 11.4% from the previous year, also posting the largest year-over-year increase since 1979. In addition, electricity prices for the domestic market increased by 1.5% on a monthly basis, which results in the fourth consecutive monthly increase.
Raw materials
Despite continued concerns about energy supplies in Europe, natural gas finished last week lower. Oil also normalized and marked a yearly low on September 7. The decline in black gold prices likely reflects potentially weaker demand in a situation of economic turmoil.
Whatto expect this week?
Investors' focus will be on the Fed and the decision to raise interest rates further. Expectations are for another increase of 75 basis points. In addition, this week there will also be a statement from the central banks of the United Kingdom, Japan and Switzerland. The global war on inflation is intensifying.
In US markets, we expect another volatile week as fears of a recession intensifies along with aggressive behavior from the Central Bank (FED).
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Disclaimer:
This information is marketing material and does not present investment consultation, advice, investment research, or investment recommendation. The information is valid as of the issue date of the marketing material and may alter in the future. The value of the units in the collective investment schemes changes over time and it could be higher or lower from the value at the time of the investment. No profits are guaranteed and risk exists for the investors to not receive the full amount of their investments. Investments are not guaranteed by a guarantee fund which is created by the country or another form of guarantee. Information on the performance of the financial instruments in the past is not a reliable indicator for future performance. Therefore, it is recommended for investors to acquaint themselves with the Prospectus and the Document with key information for investors before making a final investment decision. You can find these documents in Bulgarian on the website of Compass Invest - www.compass-invest.eu, and you can request and get a free paper copy at the office of the management company at: Sofia, 19 George Washington Str, floor 2, during every business day from 9 am to 5 pm. Future results are subject to taxation, which depends on the personal situation of each investor and may change in the future. A summary of the rights of the investors is available at the following hyperlink in Bulgarian: here. The mutual funds, which are managed by Compass Invest, are actively managed without following an index. We would like to inform you that Management Company Compass Invest can make a decision to terminate the offering of funds on the territory of the Republic of Bulgaria. The investment in units of mutual funds, in addition to benefits, carries certain risks like: liquid, operational, interest, currency, and political risk, as well as macroeconomical risk, currency risk, concentration risk, etc. The full information about risks can be found in the Prospectus of the respective fund.
Risks:
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1) Market risk with the following components: a) interest risk related to a decrease of the value of the investment due to a change of the interest rates levels b) currency risk related to a decrease of the value of the investment, denominated in a currency which is different from BGN and EUR c) price risk related to a decrease of the value of the investment in the case of unfavorable changes of the market’s prices;
2) Credit risk – related to a decrease of the value of the position in the case of unexpected events with a credit nature which are related to the issuers of financial instruments, the counter side of exchange and OTC transactions, as well as countries, in which they operate;
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5) Concentration risk – in case of incorrect diversification of exposures to groups of related clients, from the same economic branch, geographic area, etc.
6) Position risk which is related to the change of price of a certain instrument in result of factors related to the issuer or in case of a derivative instrument – related to the issuer of the base instrument;
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