UMich inflation expectations: Consumers pessimistic as prices rise high
Inflation forecast from University of Michigan (UMich) surged in October. 1-year inflation expectations rose to 3.8%, while long-term inflation rose to 3.0%.
Meanwhile, consumer sentiment index dropped significantly to 63.0 (vs. expected 67.1), mainly due to sharp decline in expectations.
Notably, nearly 49% of consumers said high prices are negatively affecting their standard of living. This figure matches the record level from July 2022.
Bank stocks rally after favorable earnings reports
JPMorgan Chase shares , Wells Fargo and Citigroup rose 3-5% across the board after earnings beats thanks to benefits from high interest rates.
JPMorgan:
Revenue reached 39.9 billion USD, up from 32.7 billion USD year-ago.
Total deposits reached 2.38 trillion USD (higher than expected 2.37 trillion USD).
Net income reached 22.9 billion USD, far exceeding forecast of 17.6 billion USD, with acquisition of First Republic Bank contributing over 1 billion USD.
EPS at $4.33 (expected $3.89).
Citigroup:
Revenue reached 20.1 billion USD, up 9% from last year.
Net income up 2% from year-ago period, reaching 3.5 billion USD.
EPS at $1.63, higher than expected $1.23
Operating expenses up 6% to 13.5 billion USD, expected to cut staff in coming months.
Period-end deposits reached 1.3 trillion USD at quarter-end, down 3% year-ago.
Wells Fargo:
Revenue up 6.6% to 20.86 billion USD.
Net income reached 5.767 billion USD, up 61% from 3.592 billion year-ago.
Strong profits vs. year-ago despite 2 billion USD in fees related to regulatory issues.
EPS at $1.48 (above expectations $1.24).
Oil prices rise sharply after US sanctions
Oil prices up over 4% after US tightens sanctions on Russia, raising concerns over tighter supply.
According to US Deputy Treasury Secretary, the oil price cap sanctions aim for 2 purposes:
Reduce Russia's oil profits to fund attacks on Ukraine.
Keep the global energy market stable.
The sanctions raise concerns they could further reduce global supply as US oil inventories are at lowest level in decades.
Fed balance sheet warns of persistent deficits
Outflows from money market funds slowed last week to 1.6 billion USD but remained at record highs.
Retail investor funds continued to see inflows for 25 straight weeks, while institutional funds saw outflows of 13 billion USD.
Unusual increase in bank deposits last week pushed spread between bank deposits and money market funds back to record highs.
Fed balance sheet declined slightly by 3.7 billion USD last week.
However, this figure also reached lowest level since June 2021, down over 1 trillion USD from April 2022 peak.
IMF warns US facing financial instability, predicts US current account deficit will widen and persist.
Business bankruptcy rate doubles due to interest rate pressure
The number of corporate bankruptcies in September rose to 62 cases, double compared to before the Fed raised interest rates since March 2020 and expected to continue increasing until mid-2024.
Auto loan interest rates have risen to the highest level since 2001
Auto loan interest rates hit 9.95%, causing consumers to face record payments. Compared to early 2022 when low-interest loans accounted for more than 35%, currently, auto loans with 0% and under 3% APR have decreased significantly.
The UAW strike could also deplete car supply. Used car prices are decreasing more slowly than in previous years - bad news for consumers.
Some other news:
Office vacancy rates in the US and London reach the highest level in 20 years.
Furniture retailer Ikea slashes prices on a range of furniture products as soaring inflation affects consumer sentiment.
Apollo will acquire the owner of Wagamama valued at 506 million pounds.
BlackRock's earnings rise due to strong demand for technology services.
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