Signs of Stagflation and Travel Industry Troubles Sink Stocks

The NASDAQ reached a new all-time high yesterday but the party didn’t last long as stocks around the world have been selling off overnight. Asia Pacific trading saw Hong Kong drop 1.8%, Seoul lose 1.6%, Tokyo tumble 0.8% and Sydney slide 1.3%. In Europe this morning, Paris is down 1.2%, Frankfurt has fallen 0.8% and London has lost 0.4%. The three main US index futures contracts are all down about 0.6%.

Sentiment has soured on increasing signs of Stagflation (high inflation and a weak economy), putting central banks into a tough position on interest rates. Overnight, Australia reported higher than expected consumer prices (3.6% vs street 3.4%) adding to a theme of rising inflation pressures seen yesterday from worse than expected Canadian producer prices and US new house prices. Meanwhile, survey data out of Australia overnight suggested its economy is weakening, which echoed yesterday’s disappointing US Dallas Fed Manufacturing survey.

This morning, German consumer prices (2.8% vs street 2.7% and previous 2.4%) also worsened more than feared. Later this morning the US Richmond Fed Manufacturing Survey is due, followed by the US Beige Book regional economic report in the afternoon.

Reflecting higher inflation expectations, the US 10-year treasury note yield has climbed up above 4.65%. Rising commodity prices may also be contributing to growing inflation pressures. US Crude Oil is up 0.7% and is trading back up above $80.00/bbl as investors look toward the upcoming OPEC+ supply decision. Copper is down 1.3% but still trading above $4.75/lb. Gold is down 0.7%, but still trading above $2,360/oz.  

American Airlines is down 9.0% in premarket trading after sacking its Chief Commercial Officer and cutting its revenue forecast to a decline of 6% from a decline of 3% from last year. Canadian bank earnings week continues with Bank of Montreal reporting disappointing results ($2.59 vs street $2.77), while National Bank beat expectations ($2.54 vs street $2.45).

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