Round up of today's market news *

North American News

US Major Indices Suffer Slight Decline in Today’s Closing

Fractionally lower for the major indices even though treasury yields are down on the day

Major Indices Wrap Up the Week with Slight Downturns; Market Focus Shifts to Tomorrow’s Pivotal US Jobs Data

As the week comes to a close, the Dow and S&P indices have recorded marginal declines, while the NASDAQ remains largely unchanged compared to last week’s closing levels. Investors are now turning their attention to the upcoming release of US jobs data, a significant catalyst that is expected to wield considerable influence over market dynamics tomorrow. Anticipation runs high, and the NASDAQ’s stability of late may be in for a shakeup as the data’s impact reverberates through the market.

The final numbers are showing:

Dow industrial average is down -9.98 points or -0.3% at 33119.58
S&P index is down -5.57 points or -0.13% at 4258.19
NASDAQ index is down -16.19 points or -0.12% at 13219.82

For the trading week:

Dow is down -1.16%
S&P is down -0.70%
Nasdaq is unchanged

The declines today, come despite lower yields for most of the day (the 30 year is now positive as the yield curve continues it drive to flat):

2 year 5.020%, down -3.0 bps
10 year 4.718%, -1.6 bps
30 year 4.894%, +1.6 bps
2-10 year spread is -30.4 bps
2-30 year spread is -13 bps

NFP Preview: Forecasts from some of the major banks

Nonfarm Payrolls are forecast to increase by 170K in September vs. 187K in August. The Unemployment Rate is expected to fall a tick to 3.7% while Average Hourly Earnings are expected to remain steady at 4.3% year-on-year

Deutsche Bank

We expect a 150K gain for September and see the unemployment rate ticking higher to 3.9%, with earnings growth still at +0.2%.

Commerzbank

We forecast job growth of 160K.After the surprisingly sharp rise from 3.5% to 3.8% in August, the unemployment rate is likely to have fallen again slightly to 3.7%, as the trend in labor force growth is only around 100K.We do not expect the unemployment rate to rise significantly until next year when the economy is likely to slip into recession and employment is likely to shrink.

NBF

Hiring could have accelerated in the month if previously released soft indicators such as S&P Global’s Composite PMI are any guide. Layoffs, meanwhile, may have decreased slightly judging by the decline in jobless claims between the August and September reference periods. With these two trends reinforcing each other, we expect job creation to have accelerated to 200K in the month. The household survey could show a similar gain, a development which would translate into a one-tick decline of the unemployment rate to 3.7%, assuming the participation rate slipped one tick to 62.7%.

RBC Economics

The next round of US payroll employment data will likely show the unemployment rate holding steady at 3.8%, and employment up by 177K, slightly below the 187K add in August.Labour market conditions remain tight with initial jobless claims trending at low levels.But signs of slowing demand including falling job openings mean we can continue to expect conditions to slow.

CIBC

We expect more of what we’ve seen over past six months: a gradual weakening of job growth and further evidence of a slow but steady rebalancing of the labour market.The unemployment rate and the participation rate should hold at 3.8% and 62.8% respectively.

Citi

We expect NFP to rise by a strong 240K in September, partly reflecting the reversal of seasonal issues that led to a softer 105K increase in June (which has been revised lower from an initial 209K). Average hourly earnings should rise 0.3% MoM, although with upside risks of a print that rounds to 0.4%. This would reflect a rebound in wage growth from a modestly softer increase in August.Meanwhile, we expect the unemployment rate to decline back to 3.6% in September after an unexpected increase to 3.8% in August.The increase in August was largely due to a rise in the participation rate, which increased from 62.6% to 62.8%.

Wells Fargo

We forecast that the US economy added 150K jobs in September, a step down from 187K in August.Looking beyond payrolls, we anticipate that the labor force ebbed a bit in September after last month’s jump.If realized, this would nudge the unemployment rate a tick down to 3.7%.Meanwhile, the trend in average hourly earnings growth continues to gradually ease as turnover settles down and the supply and demand for labor have moved toward a better balance.We estimate that average hourly earnings growth picked up slightly to 0.3% in September, although that would be enough to push down the three-month annualized pace of wage gains below 4%.

Atlanta Fed GDPNow estimate for Q3 stays unchanged at 4.9%

The Atlanta Fed model for Q3 growth remains elevated after data today

The Atlanta Fed model for Q3 growth remained elevated at 4.9% after the data released today.

In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 4.9 percent on October 5, unchanged from October 2 after rounding. After recent releases from the US Census Bureau, the Bureau of Economic Analysis, and the Institute for Supply Management, a decrease in the nowcast of third-quarter real personal consumption expenditures growth from 3.8 percent to 3.7 percent was offset by an increase in the nowcast of third-quarter real gross private domestic investment growth from 5.4 percent to 5.9 percent.

US initial jobless claims 207K versus 210K estimate

US initial dollars claims or continuing claims for the current week

Prior week jobless claims 204K were revised to 205K
Initial jobless claims 207K vs 210K estimate
The 4-week moving average initial jobless claims 208.75K vs. 211.0k last week revised to 211.25K
Continuing claims 1.664 M vs 1.675M estimate.
Prior week continuing claims 1.670M revised to 1.665M
The 4-week MA of Continuing claims is at 1.668M a 5K decline from last week’s 1.673M
The largest increases in initial claims for the week ending September 23 were in California (+2,712), Ohio (+1,422),Michigan (+1,282), Alabama (+870), and Missouri (+532),
The largest decreases were in Georgia (-1,853), SouthCarolina (-1,199), New York (-1,149), Indiana (-705), and Florida (-485).

US August trade balance -58.3B vs -65.08B expected

US August 2023 international trade balance data

Prior was -65.08B
Goods trade -84.64B vs -84.27B prelim
Prior goods trade was -$90.92B

US September Challenger layoffs 47.46k vs 75.15k prior

Latest data released by Challenger, Gray, and Christmas Inc
Prior 75.15k

US-based employers announced 46,457 job cuts last month, down roughly 37% from the 75,151 job cuts announced in August. However, this is still a roughly 58% increase in layoffs compared to September last year and continues the trend of rising job cuts i.e. early signs of softening in the labour market.

SEC lanuches probe into Elon Musk’s purchases of Twitter stock in 2022

Elon Musk bought shares ahead of the merger

The tumultuous relationship between the SEC and Elon Musk continues as they sue him over his 2022 stock purchases of Twitter, according to a report.

San Francisco Fed Pres. Daly: Monetary policy is restrictive

San Francisco Fed Pres. Mary Daly speaking
Monetary policy is restrictive.
Progress isn’t victory, must remain resolute
To ensure we fully achieve goals, we need to finish the work.
We need vigilance and agility.
The economy still has considerable momentum.
We are a long way from 2% inflation and a long way from sustainable employment.
Even with recent slowing in the labor market, job growth remains well above what needed to keep pace with growth.
It’s possible the slowing so far it will translate into steady march towards goal
There are real risks in inflation projection.
Will need to see progress on a super – core inflation to be confident we are on path to 2%.
If continue to see labor market and inflation calling we can hold rates steady
If financial conditions remain tight, that reduces need for more action from fed
But if calling inflation stalls or financial conditions loosen, will need to raise rates further
Need to keep an open mind, have optionality on rates
With rising bond yields, the need to do additional tightening by Fed is not there

Fed’s Barkin: Yields have come up amid fiscal issuance and a strong data

Feds Barkin is a 2024 voter

Yields have come up amid fiscal issuance and strong data
A 2% fed funds target is a very reasonable inflation target.
Does not see the logic of throwing out target before hitting it.
Rates feel high now, but they are not over the long term.

US Congress chaos – Goldman Sachs says a US shutdown in November is their “base case”

The removal of the US House of Representatives speaker boosts the chances of a US government shutdown in mid-November says Goldman Sachs:

All other things equal, the leadership change raises the odds of a government shutdown in November, though with several weeks left until the deadline, many outcomes are possible.
With many policy disputes remaining and a $120bn difference between the parties on the preferred spending level for FY2024, it is difficult to see how Congress can pass the 12 necessary full-year spending bills before funding expires Nov. 17.
The next speaker is likely to be under even more pressure to avoid passing another temporary extension—or additional funding for Ukraine—than former Speaker McCarthy had been.

And thus:

We continue to view a shutdown in Q4 as the base case, likely when funding expires Nov. 17.
That said, while a leadership vacuum raises the odds of a government shutdown, we still view a prolonged shutdown (i.e., more than 2-3 weeks) as unlikely given the political consequences of certain aspects of a shutdown, particularly a failure to pay servicemembers, which occurs twice a month (the next pay date at risk is Dec. 1).

Fitch Ratings on further US “deterioration in governance” but shutdown won’t impact rating

Fitch has weighed in on the chaos in the US government that played out most recently just yesterday with the removal of the House Speaker.

“Given the fact that the House speaker was ousted right after the continuing resolution was agreed, we expect political brinkmanship around government funding negotiations will remain tense and a shutdown later this year can’t be ruled out,”
added that a shutdown would not impact Fitch’s US AA+ rating as the country’s “deterioration in governance” was already a key factor behind Fitch’s downgrade

S&P Global had already downgraded the US, analysts at the firm said that a government shutdown would affect economic activity but was not likely to have a further impact on their rating.

Former Fed vice chair Clarida says he thinks the FOMC rate hikes are done now

Clarida is now a Pacific Investment Management Co (PIMCO) managing director and the firm’s global economic advisor.He spoke in an interview with Bloomberg.

In brief:

I was in the camp going into the September meeting that we would likely get one more hike in this cycle, if really just for precautionary reasons
And certainly the dots at the September meeting had 12 of the 19 participants indicating one more hike.
I’m less of that view now.I think given that, as I said, the bond market can do some of the Fed’s job forit. You know, if even some of this recent increase were to stick, I think the Fed could well could well be done.

Clarida has also written, in more detail, on his Federal Open Market Committee (FOMC) views. Again, in brief:

The Fed is highly data-dependent now that its policy is well into restrictive territory.
The Fed’s latest estimates for U.S. growth, unemployment, and inflation in 2024 suggest a soft landing scenario of unemployment barely above neutral, and growth only modestly below trend. This was a notable shift from prior estimates and from the traditional theory that to drive down inflation reliably to target, some softening in the labor market is required.
The Fed’s soft landing outlook is feasible, but we see clear risks: areas of stubborn inflation along with headwinds facing a heretofore resilient consumer and economy (e.g., student loan payments resuming after a multi-year pause).
The Fed may be challenged to enact the additional rate hike it’s currently projecting.

Canada August goods trade balance +0.72B vs -1.50B expected

Canada August trade balance

First trade surplus since April
Prior was -0.99B (revised to -0.44B)
Imports vs 61.40B prior
Exports vs 60.42B prior
Trade balance with US $10.4B vs $8.2B prior

Canada Sept Ivey PMI 53.1 vs 53.5 prior

Canada Sept Ivey PMI

Prior was 53.5
Non-seasonally adjusted 54.2 vs 56.8 prior

Commodities

Silver consolidates as a triple-bottom pattern emerges at hourly chart

Silver experiences mild losses, lingering below the $21.00 mark amidst a cautious market.
Technical analysis reveals a consolidation phase, with seven-month-low support at $20.91 and resistance around $21.50.
Short-term triple-bottom pattern emerges, targeting $22.00, contingent on breaking through several resistance levels.

Silver remains subdued late in the New York session, printing mild losses of 0.35%, below $21.00 per troy ounce after hitting a daily high of $21.29.

The daily chart portrays the white metal in consolidation, capped on the downside by a seven-month-low at around $20.91.On the upside, resistance lies at around $21.50, slightly below a ten-month-old support trendline.A break of those levels could pave the way to test $22.00.

UBS cut its year-end gold price forecast to US$1,850 (from $1950 previously)

UBS cuts its projections for gold:

End of 2023 forecast is USD 1850

prior forecast was $1950

June 2024 forecast $1950

prior was $2100

UBS cites:

Downside risks are likely to persist as the landing points for gold’s key drivers remain uncertain.
But we recommend those long (on) the metal to hold, as we expect a recovery

Natural gas comes to life on cooler late-October forecasts

Henry Hub natural gas up 7% today

We’re rapidly heading towards heating season in North America and that means the weather is in focus again. The latest forecasts are for a cool second-half of October and that’s helped to lift front-month natural gas above $3 for the first time since March.

Today’s weekly natural gas injection number was 86bcf compared to 90b expected and with production down, the number should start to tighten. US inventories are still high and there’s no scope for a return to the $6 levels of late last year but there’s suddenly some life in a market that had been left for dead. What comes next will depend on the weather.

Crude oil price: JP Morgan cite demand destruction, while production & stockpiles to grow

A JP Morgan analyst on oil ahead, forecasting a year-end target of $86/barrel:

the sharp price rise has resulted in “Demand destruction has begun (again)”
(northern) summer driving season coming to a close
“global oil stock draws have ended”
“Preliminary satellite stock observations from Platts suggest that during the first three weeks of September, global commercial crude inventories declined 8 million barrels, while the world’s oil product stocks surged 38 million barrels, for a net build in total commercial oil liquids of 30 million barrels”
expects inventories to build up heading into winter

Brent oil drop – ICYMI – Russian media report that Russia may ease diesel exports ban soon

Crude oil prices dropped sharply during Wednesday trade.A report in Kommersant, a nationally distributed daily newspaper published in Russia mostly focusing on politics and business, said that the Russian government is ready to ease a ban on diesel exports in coming days.

Kommersant cited unidentified sources for the information. Deputy Prime Minister Alexander Novak said the restrictions were working.

EU News

European equity close: First gains this week

Closing changes in Europe

Stoxx 600 +0.3%
German DAX -0.2%
Francis CAC +0.1%
UK’s FTSE 100 +0.6%
Spain’s IBEX +0.7%
Italy’s FTSE MIB +0.3%

UK September construction PMI 45.0 vs 49.9 expected

Latest data released by S&P Global – 5 October 2023

Prior 50.8

The downturn in September is led by a slump in house building as output also saw its steepest decline since May 2020. Adding to that, new orders also suffered its fastest pace of decline in over three years. S&P Global notes that:

“Output levels declined across the UK constructionsector for the first time in three months during September and the latest downturn marked the worst overall performance since the early stages of the pandemic.

“A rapid decline in house building activity acted as a major drag on workloads, with construction companies widely commenting on cutbacks to new residential development projects in the wake of sluggish demand and rising borrowing costs. Concerns about the domestic economic outlook also dampened client spending during September, which contributed to the fastest reduction in commercial building since January 2021.

“The survey’s forward-looking measures once again remained relatively downbeat as order books decreased at an accelerated pace and business activity expectations eased to the lowest so far this year. Moreover, fewer project starts meant that sub-contractor availability increased to the greatest extent since the summer of 2009.

“Lower demand across the supply chain contributed toa robust improvement in delivery times for construction productions and materials, alongside a stabilisation in purchasing costs during September.”

Germany September construction PMI 39.3 vs 41.5 prior

Latest data released by HCOB – 5 October 2023

Prior 41.5

This marks the quickest fall in German construction activity in 3½ years as business confidence also plunges to a near-record low. A further slump in demand led to a sharp fall in purchasing activity but at least it did help to ease price pressures. Once again, housing activity was the worst performing sector but both commercial and civil engineering activity also declined in September.

Germany August trade balance €16.6 billion vs €15.0 billion expected

Latest data released by Destatis – 5 October 2023
Prior €15.9 billion; revised to €17.7 billion

ECB’s Villeroy: Increase in bond yields may be excessive but is helping to tighten

Comments from the Bank of France President
Increase in bond yields may be excessive but it is helping to tighten financial conditions
I don’t think an additional rate hike is justified now

ECB’s Kazimir says believes that last rate hike was the final one

Remarks by ECB policymaker, Peter Kazimir

A December rate hike is not a scenario I’d like
We are on the trajectory of declining inflation

ECB’s Lane: Credit dynamic really has been quite weak

Remarks by ECB chief economist, Philip Lane

It is below what we would have expected last year

BOE’s Broadbent: It is an open question on whether there will be more rate hikes

Remarks by BOE policymaker, Ben Broadbent

There are clear signs that rate hikes are having an impact
But perhaps it may be that the effect is weaker than in the past or still delayed
Sees UK inflation reaching target in 2 years’ time

ICYMI – Italy’s Economy Minister Giorgetti questioned how realistic the ECB 2% target is

Italy’s Economy Minister Giorgetti spoke on Wednesday, dismissing some media report that Italy was at risk of a sovereign debt downgrade:

“Is Italy at risk of a sovereign rating downgrade? ‘These are headlines, you as journalists rightly believe them, I have a legitimate doubt”,

He went on to cite:

a strong economy, the second-largest manufacturing economy in Europe

And acknowledging:

“But it has a large public debt and must be careful not to make blunders.”

He also said, and its hard to link this in with those above comments but I think it was at different venue:

I don’t know how realistic the 2% inflation target set by the European Central Bank is

Other News

Citi raised its growth forecast for China to 5% this year (from 4.7%)

Bloomberg reported on CitiGroup upgrading its forecast for China’s economic growth in 2023.

In brief:

Retail sales and industrial production may improve
China’s export contraction could also narrow after official manufacturing surveys expanded for the first time in six months
“The cyclical bottom is here, with all eyes on whether organic demand will pick up amid gathering policy momentum,”
since the end of August “policy momentum exceeded expectations clearly” due to some property easing measures

IMF’s Georgieva: Current pace of global growth remains quite weak

IMFs Georgieva speaking on global economic trends
Current pace of global growth remains quite weak.
Global growth is well below 3.8 pre-pandemic average
Stronger demand for services, progress on inflation boosted chances for soft landing, but vigilance essential
Fighting inflation remains top priority
Warns that inflation will remain above target for some countries until 2025
Medium-term growth prospects have weakened further.
Winning fight against inflation requires interest rates to remain higher for longer.
US, India are bright spots, but most advanced economies are slowing and China’s output below expectations.
Estimates cumulative global output loss from successive shocks since 2020 amounts to $3.7 trillion.
Sudden resurgence of inflation could lead to sharp tightening of financial conditions.
Warns of significant risks on fiscal front in many countries, higher interest rates have increased debt burdens.

Australian data: August Exports +4% m/m (prior -2%) & Imports 0% m/m (prior +3.%)

Trade balance data from Australia for August 2023

Trade balance data from Australia for August 2023

New Zealand Sep. Commodity Price Index +1.3% m/m (prior -2.9%)

ANZ World Commodity Price Index recorded its first lift in three months in September

+1.3% m/m
prior -2.9%

In local currency terms, +2.0% m/m with the NZD depreciating 0.1% against its Trade Weighted Index

As part of their monthly report ANZ include commentary on Global shipping prices:

were mixed during September.
The Baltic Dry Index, which tends to be the most volatile of the shipping indices, lifted a massive 57%, following the sharp lift in oil prices.
Meanwhile, the China Containerised Index fell 5% and the Harper Peterson Global Index fell 9%.
If oil prices remain strong then this will put upward pressure on freight prices, but at the same time demand for shipping services is a little subdued which is helping to keep prices in check.

Japan Prime Minister Kishida spoke to unions, said he’d make wage rise surge sustainable

Japanese Prime Minister Kishida spoke at the convention of Japan’s confederation of labor unions.

This is an unusual move for a PM from Kishida’s side of the political fence. He’s the first PM from the Liberal Democratic Party to speak at the biennial Rengo event since 2007.

Kishida is pushing for wage hikes to outstrip the inflation that is hurting household budgets and weighing on consumption.

“The economy’s energy comes from pay rises,” Kishida said. “We must make the great wave of pay rises sustainable and spread it to the regions as well as to small and medium-sized businesses.”

Tsunami alert issued for area of Eastern Japan coast after Magnitude 6.6 earthquake

Near Izu Peninsula

M6.6 earthquake off Japan’s east coast

depth 10km
waves of up to 1 metre are possible for the Izu islands
areas of the Pacific coast could see slight sea level changes of up to 20 centimeters

South Korea September CPI has come in at 0.6% m/m, higher than the 0.3% expected

South Korea September CPI:

0.6% m/m

expected 0.3%, prior 1.0%

3.7% y/y

expected 3.4%, prior 3.4% also

Core CPI 3.3% y/y

prior 3.5%

South Korean Finance Min says will actively respond to speculative trading in FX market

South Korean Finance Minister Choo:

South Korea will actively respond to speculative trading in the FX market
Will take bond market stabilising measures if needed

Cryptocurrency News

Bitcoin ETF approval odds at 70%, says analyst ahead of January deadline

Bitcoin ETF will get approved with a 70% likelihood in January, according to analyst Alex Krüger.
Crypto traders are possibly preparing to employ a “Sell the News” strategy to front-run the market, Krüger says.
A rise in correlation between the DXY US Dollar Index and Bitcoin can start a 2024 rally.

As the crypto community awaits for the first spot Bitcoin Exchange-Traded Fund (ETF), analyst Alex Krüger hints at a 70% likelihood of approval in January. Krüger anticipates that traders are gearing up for this event, possibly employing a “Sell the News” strategy. Meanwhile, a growing correlation between the DXY US Dollar Index and Bitcoin has raised the prospect of a rally in 2024.

Coinbase to miss Q3 revenue estimate by 10%, analyst blames low crypto volatility, volumes

Mizuho says that Coinbase will miss current consensus third-quarter revenues by 10%, citing low trading volumes. Crypto volatility has been relatively low this year, partially due to regulatory uncertainty.

“We expect dwindling volumes combined with an expected drought in retail trading to meaningfully weigh on 3Q revenue”

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Round up of today’s market news

ByBilals Tech