Saikat Chatterjee gives a glimpse at what lies ahead.

The third-largest weekly fall in world stock markets this year is due to supply chain disruptions that are sweeping the economy. This raises the concerns of investors about the possibility of stagflation being a significant factor in the fourth quarter 2021.

These are two contradicting data points from the past 24 hours. A chaotic summer of merger activity resulted in deals valued at $1.52 trillion for the September quarter. Refinitiv data also shows that China’s economic momentum is waning. The official PMI data showed unexpectedly decreasing factory activity in September. And

Even though investors are still struggling to understand the impact of record profits growth for corporations and slower economies, the major central banks remain positive about the prospects for the global economy. Robert Almeida from MFS Investment Management said that markets are most concerned by the unexpected decline in corporate profitability, but rather the severity of this deceleration. The path to the close of the year will be difficult because of the uncertainty surrounding the U.S. debt ceiling and President Joe Biden’s trillion-dollar spending plans.

European stock futures could see sharp drops on the first of the quarter. U.S. futures will follow suit. After suffering their largest monthly decline since March 2020’s pandemic-fuelled selloff, U.S. stock futures are in losses and the greenback will see its highest weekly increase in over three months. For emerging markets, especially with inflation adjusted interest rates pushing into negative territory in the advanced world, the rise of the dollar is concerning. The slowing Chinese economy has reverberated throughout the region, with September’s factory activity shrinking in Malaysian and Vietnam and Japan growing at their lowest rate in seven years.

Markets should be more informed by Friday’s key developments

The U.S. court ruled Germany’s Allianz (DE) should face claims from investors that it has wrongly “abandoned”, the investment strategies it promised it would use to protect hedge funds which suffered huge losses.

British beverage company Diageo (LON.) stated that $500 million will be invested in Mexico to improve its tequila manufacturing capacity.

Manufacturing PMI: Spain Germany France Eurozone

UK 1 month to 6 months bill sales

New York Fed Event: Schnabel, ECB

(Graphic: World stocks and bonds – https://fingfx.thomsonreuters.com/gfx/mkt/xmvjokdkxpr/worldstocks.JPG)