Stock Markets

The Dow Jones Industrial Average reached new highs thanks to better-than-expected results. Despite concerns about Delta variants, growing inflation, and supply chain shortages, major enterprises in the United States are thriving. 

In the third quarter, more than 85% of S&P 500 businesses that reported on Tuesday outperformed forecasts. These findings strengthen the case for the Federal Reserve to begin tapering in November. The anticipation of tapering should normally be bullish for the dollar, and it has been in many respects for USD/JPY, which has risen to its highest level since November 2017. The greenback’s gains, however, came to an end as it traded lower against other major currencies.

Appropriate policy communication has always been one of the central bank’s most essential responsibilities, especially when substantial changes are expected. The fact that the dollar has not risen in value, with less than two weeks until the FOMC meeting attests to the Fed’s effectiveness. They promised to prepare the market for any change, and they’ve managed to succeed in that. There is little doubt that they will not act in November, and markets have already priced in the move. This explains why strong data and record stocks movements did not push the dollar higher.

The Beige Book report was likewise slightly more pessimistic, with slower growth reported.  It said near-term economic activity were optimistic generally, although several districts reported increasing uncertainty and more scepticism than in prior months.” Finally, the US dollar is a safe haven currency, and when equities reach new highs, investors are shifting their funds to riskier currencies such as the Australian and New Zealand dollars. They are more susceptible to global growth and the global economy’s ebbs and flows.

Crude Oil

Oil prices climbed on Thursday, extending gains from the previous session, as crude and fuel stockpiles in the United States contracted further, with gasoline supplies reaching a two-year low, indicating robust demand. The US Energy Information Administration (EIA) said on Wednesday that oil stockpiles decreased by 431,000 barrels in the week ending Oct. 15, to 426.5 million barrels, contrary to experts’ forecasts in a Reuters poll for a 1.9 million-barrel increase.

Crude oil stockpiles at Cushing have been rapidly depleted, sustaining the WTI flat price and structure, with the backwardation on the WTI curve’s immediate end increasing beyond 50 cents. The fact is that WTI futures contracts are now in severe backwardation, indicating market tightness. This is when later-dated futures sell for less than the present contract, reflecting the expenses of keeping oil.

Investors must note that oil refineries are increasing output to match a synchronised increase in demand throughout Asia, Europe, and the United States, but facility maintenance and high natural gas costs will limit supply in the fourth quarter.

December West Texas Intermediate (WTI) crude futures in the United States rose 37 cents, or 0.4 percent, to $83.79 a barrel. November WTI crude finished up 91 cents, or 1.1 percent, after reaching its highest since October 2014 earlier in the day.

Gold

Gold prices rose little today, continuing gains into a third day as a weaker dollar made the commodity more affordable to purchasers owning foreign currencies.

While the Federal Reserve should begin winding down its stimulus programmes, two US Federal Reserve members warned on Wednesday that any potential interest rate increase may be a premature thought.