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US earnings season continued in an upbeat fashion, with reports from Netflix, Procter & Gamble, and Tesla.

US headline CPI inflation hit a thirteen year high, driven by volatile elements such as energy, food and rent.

Stock market sentiment ended the week on a high note, as US Senators averted a potential debt crisis. Markets finished the week higher in the US, Europe and the UK. 

Inflation continued to rise in the Europe in September, but the European Central Bank reiterated its view that inflation is transient and accommodative monetary policy must continue.

Nine officials from the US Federal Reserve now expect an interest rate rise in 2022, according to the latest projections. Fed Chair Jay Powell also hinted that the central bank could announce the tapering of its bond-buying programme in November.

Most major stock markets fell last week, as concerns over Covid-19 and economic growth dampened risk sentiment.

US stock markets hit all-time highs again last week, led by the tech-focused Nasdaq. European markets were also slightly higher. It was a stronger week for Asian and emerging markets, with China gaining 1.7% and Japan’s Nikkei 225 rising 5.4%.  

US equity markets were troubled by hints that the Federal Reserve (Fed) might begin tapering its bond buying programme before the end of the year, although the Nasdaq outperformed. European markets fell sharply on growth recovery fears, prompted by the spread of the Delta variant.

Central bank digital currencies, or CBDCs for short, have been called ‘a concept whose time has come’. Ironically for an age when cryptocurrencies or ‘decentralised finance’ are on the rise, it seems that major central banks are exploring the merits of digital versions of their own currencies.

A key challenge for global central banks remains the sharp spike in inflation. Driven by used cars, travel and lodging, US inflation shot up by 5.4% in June. That’s the highest for 13 years. If higher inflation takes hold, the US Federal Reserve might have to act aggressively to slam the overheating economy into reverse.

Japanese indices fell on fears that the Olympic Games would worsen the spread of the Delta variant, while in China large cap indices underperformed slightly.

US Treasuries reacted calmly to the inflation figure, as yields slipped slightly, and prices rose, for longer-dated bonds. Core eurozone yields also fell. 

President Biden gained bipartisan support for the first phase of his infrastructure bill, worth $1 trillion. The package will focus on traditional elements, such as roads and bridges, and could add as much as 1 percentage point to GDP growth.

The G7 group of nations has agreed a deal for a global minimum tax rate of at least 15%. The new rules will see the largest and most profitable companies paying tax in the countries where they do business, not just where they are registered.

Federal Reserve comments about the possibility of raising interest rates and tapering monetary support caused volatility in the stock markets. 

Federal Reserve comments about the possibility of raising interest rates and tapering monetary support caused volatility in the stock markets.