By Geoffrey Smith
Investing.com -- The U.S. will release inflation data for September, which are expected to show another chunky rise in core prices. Jobless claims, which snapped a two-month trend of declines last week, are also due. Earnings season starts to crank up, with updates from Delta and Blackrock joining strong numbers (and a cautious outlook) from Taiwan Semiconductor overnight. Stocks are set to open with a modest bounce after five straight days of declines. The U.K.'s markets are steadier, amid signs that PM Liz Truss will be pressured by her own party into abandoning her controversial tax cuts, while Saudi Arabia pushes back against U.S. criticism of its support for OPEC's oil output cut, adding for good measure that the Biden administration asked it to delay until after the midterms. Here's what you need to know in financial markets on Thursday,13th October.
1. Core CPI set for another big rise despite headline slowdown
The annual rate of U.S. consumer inflation is expected to have slowed slightly to 8.1% in September, but the devil will be in the details when the numbers are published at 08:30 ET (12:30 GMT).
Analysts expect prices to have risen 0.2% on the month, a little more than in August, while core prices – which strip out volatile elements such as fuel and food – are expected to have risen a chunky 0.5%, pushing the annual rate back up to its 4-decade high of 6.5% - still far above the Federal Reserve's comfort zone.
The U.S. will release weekly jobless claims numbers at the same time, after last week's numbers snapped a two-month trend of falling claims. Continuing claims numbers will also be in the spotlight for what they say about how easy it is for the newly laid-off to find alternative work. The September labor market report last week suggested that the market is still tight by any historic measure.
2. Delta and Blackrock report earnings
The third quarter earnings season starts to crank up, with results due from Delta Air Lines (NYSE:DAL), BlackRock (NYSE:BLK), Fastenal (NASDAQ:FAST), Progressive (NYSE:PGR), Domino's Pizza (NYSE:DPZ), and Walgreens Boots (NASDAQ:WBA).
Markets are set to gobble up anything the companies say about the impact of the strong dollar on their outlook, as well as their ability to push through price increases. PepsiCo (NASDAQ:PEP) stock had risen on Wednesday after pushing through double-digit price hikes for many of its products.
BlackRock's numbers will also be of interest for what they say about how investors are reacting to the highest volatility across financial markets since the start of the pandemic two and a half years ago.
3. Stocks set for bounce but in holding pattern ahead of CPI; TSMC shines
U.S. stock markets are set to open with a bounce after five straight days of losses amid concern about rising interest rates and a slowing world economy. The mood has improved marginally after the minutes of the latest Fed meeting showed the first signs of concern that the central bank may overshoot with its rate hikes as the economy slows down.
By 06:15 ET, Dow Jones futures were up 123 points or 0.4%, while S&P 500 futures were up by a similar amount, and Nasdaq 100 futures were up 0.2%, extending a recent pattern of underperformance by technology and growth stocks.
Stocks likely to be in focus later include Taiwan Semiconductor (NYSE:TSM) and Samsung (KS:005930), both of whom have secured exemptions from the latest U.S. restrictions on the sale of silicon chips to their operations in China. TSMC also reported earnings that topped estimates but said it would cut its capital spending by 10% over the coming year. Also in focus is GlaxoSmithKline (NYSE:GSK), after it announced encouraging trial results for its experimental vaccine against respiratory syncytial virus (RSV), a leading cause of pneumonia in small children and the elderly.
4. U.K. markets steady on bets of Truss U-turn
U.K. bond and stock markets steadied and the pound rose amid signs that resistance from her own party's lawmakers will force Prime Minister Liz Truss to abandon most, if not all, of her planned tax cuts.
Truss had again said on Wednesday she would not cut public spending to balance the massive tax cuts and energy subsidies that were her first moves after taking office. That would leave her the choice of either abandoning the tax cuts or pressing ahead with a sharp rise in borrowing. The latter course would hurt the Conservative Party's core constituency of middle-class homeowners with mortgages.
By 06:30 ET, the pound was up 0.5% against the dollar at $1.1159, while the yield on the benchmark 10-Year Gilt was down 8 basis points at 4.35%. The 30-Year yield, which hit 5% on Wednesday, was back at 4.68%.
5. Saudi Arabia pushes back at U.S. criticism; EIA inventories due
Saudi Arabia pushed back strongly against U.S. warnings of 'consequences' for its decision to cut oil output from next month, saying that the OPEC+ decision had been taken purely with regard to balancing the global market.
The Biden administration has characterized the move as a betrayal of U.S.-Saudi relations, in as much as it will shore up Russia's finances and help it to keep pursuing its war in Ukraine. In a published statement, the Saudi foreign minister also pointed out that the U.S. had asked it to delay the output cut until after mid-term elections in November.
By 06:35 ET, U.S. crude futures were bumping along near one-week lows, down 0.1% on the day at $87.20 a barrel, while Brent crude was flat at $92.00 a barrel. The U.S. government releases weekly inventory data at 11:00 ET.