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Wall Street rallied on the first trading day of October, with the Dow Jones gaining 480 points, the S&P adding more than 1% and the Nasdaq up 0.8% boosted by favorable economic data, a potential oral treatment against Covid-19 and optimism over the passage of an infrastructure bill. Merck shares jumped after the company said its experimental coronavirus pill reduces the risk of death and hospitalization by 50%. On the economic data front, factory growth advanced to a 4-month high, personal spending topped forecasts and PCE prices continued to point to high inflationary pressure. On the political front, House Democrats delayed plans to vote on a $1 trillion infrastructure bill as no deal has been reached yet. Also, both the Senate and the House passed a short-term appropriations bill that would keep the government running through December 3rd. For the week however, all three indexes posted losses with S&P 500 and the Nasdaq posting their biggest weekly percentage drop since February.

European stocks closed lower on Friday, with Frankfurt’s DAX down 0.7% to 15,156 as fears of rising inflation and the need for tighter monetary policy at a time when the economies are still fragile continue to hit sentiment. Preliminary data showed the Eurozone consumer price inflation soared to a 13-year high of 3.4% in September, after ECB President Lagarde said earlier in the week that there are no signs that recent price increases are becoming broad-based across the economy. Meanwhile, retail sales in Germany rose less than expected in August and manufacturing PMI data was little changed from earlier estimates for both the Euro Area and Germany. Elsewhere, the core personal consumption expenditures price index in the US stabilized in August. For the week, the DAX retreated more than 3%, the most since January 25th.

The FTSE 100 fell 0.8% to 7,027 on the first day of the new quarter, led by weakness in banks and commodity-linked stocks. Growing worries that inflation may persist have raised expectations of sooner-than-expected tapering by the Bank of England and US Federal Reserve, while investors fear global growth may have peaked. On the corporate front, British beverage company Diageo said it will invest $500 million to increase its tequila production capacity in Mexico. The FTSE 100 retreated 0.4% last week.

The CAC 40 erased early losses to close almost flat at 6,518 on the first trading day of October, after posting in September the first month of losses since January. Mounting worries about slowing economic growth and rising inflation were offset by upbeat news that an antiviral pill developed by US drugmaker Merck & Co could half the chances of dying or being hospitalized for those most at risk of contracting severe Covid-19. On the domestic data front, the French manufacturing PMI fell to 55 in September from 57.5 in August, slightly more than an initial forecast of 55.2, reflecting intense supply disruptions. For the week, the CAC 40 lost 1.8%.

The FTSE MIB fell almost 0.3% to close at the 25,615 level on the first trading day of October, in line with its European peers, and closing the week down around 1.4% as investors continued to worry about slowing global economic activity and rising inflation. CNH Industrial (-3.1%), Recordati (-1.9%), and Finecobank (-1.8%) led the daily falls; while Mediolanum increased 1.6% after confirming the payment of dividends in the amount of 0.75 euros and announced the possibility of distributing an extra amount during the last quarter of 2021.

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