Wall Street rose on 21 October, with the S&P 500 up 0.58% to 7,757, even as the US 10-year Treasury yield stayed above 5% ahead of the Federal Reserve’s 27 and 28 October meeting, according to the Rio Times.
What happened
The Dow gained 0.69% to 52,856, and the Nasdaq jumped 1.05% to 26,703, led by technology stocks as optimism about artificial intelligence outweighed worries about interest rates. The VIX, a measure of expected market turbulence, fell 3.64% to 16.68. The 10-year yield stood at 5.129%, gold rose 0.28% to about $4,126 an ounce, and the dollar index was little changed at 101.647.
In Britain, inflation rose to 3.5% in September, above the 3.4% that economists expected, according to the Office for National Statistics, with core inflation at 2.8%.
What markets expect from the Fed
On Polymarket, a prediction market where people bet real money, traders put the chance of no change at the Fed’s October meeting at 87.5%, and the chance of a quarter-point rise at 12.5%, as of 11:30 p.m. ET on 21 October. These prices are bets, not forecasts by the Fed or polls. Earlier in the month, on 12 October, the same market put the odds of a quarter-point rise in December at 74.5%, a sign that traders see the inflation fight as unfinished. Radarr reported earlier that hot US inflation data revived bets on Fed rate hikes.
Europe faces similar pressure. The IMF said in a report on 16 October that the European Central Bank would likely raise rates by at least another 25 basis points this year, after rises in June and September.
The oil factor
Energy prices have added to the inflation worry. On 12 October, Brent crude briefly jumped above $105 a barrel after Houthi attacks on Saudi energy infrastructure, before easing to around $103, and markets treated the move as an inflation story rather than only a supply shock.
Why it matters for Africa
A US 10-year yield above 5% and a firm dollar raise the cost of financing for emerging economies. The Rio Times notes that this is a particular concern for countries that import energy and run current-account deficits. The squeeze is already visible in Africa: the World Bank said recently that nearly four-fifths of African countries spend more on interest payments than on health or education, according to Semafor.
What to watch
Flash purchasing managers’ indices for the US, euro area, UK and Japan are due on Friday 23 October, followed by the Fed’s decision on 28 October. Any new escalation in the Gulf that pushes Brent back above $105 would revive the inflation worries that are keeping yields high.
Related on Radarr:
- Hot US Inflation Revives Fed Hike Bets, Testing African Currencies
- IMF Urges Central Banks to Keep Interest Rates High as Inflation Persists
- IMF Urges Central Banks to Maintain High Interest Rates Amid Inflation
Sources: Rio Times Global Economy Briefing, 22 October; Rio Times, 12 October; StockBiz; Semafor Africa.
