North American News
US Stock Markets Mount Impressive Recovery, Seizing Victory from the Brink
- Lower opening on the back of geopolitical conflict
US stocks initially opened lower due to geopolitical conflict; however, they later reversed course and gained momentum. While the US bond market remained closed, US bond futures rallied, indicating lower yields and suggesting a shift towards safety assets. Despite concerns about inflation, Fed officials suggested that rate hikes were not imminent, leading to a downward revision in expectations for a rate hike.
A snapshot of the closing level shows:
- Dow industrial average up 197.05 points or 0.59% at 33604.64
- S&P index up 27.16 points or 0.63% at 4335.65
- NASDAQ index up 52.89 points or 0.39% at 13484.23
US employment trends for September rises to 114.66 versus 114.16 last month (revised)
- US employment transfer September 2023
- Prior month 113.02 revised higher to 114.16
- US employment transfer September 2023 rises to 114.66
From the Conference Board:
“The ETI rose slightly in September, signaling continued job growth ahead,” said Selcuk Eren, Senior Economist at The Conference Board. “The Index has been on a slow downward trend since it peaked in March 2022, but remains well above prepandemic levels. This suggests the US economy will continue adding jobs through the remainder of 2023 and into next year, even if the rate of growth slows. With job gains remaining robust and wage growth still elevated, we expect the Federal Reserve to raise interest rates in November and keep rates higher for longer.”
“Several components of the ETI confirm that US labor markets are still tight. Initial claims for unemployment insurance remain very low, as does the ratio of workers who work part-time because they can’t find full-time positions. Likewise, the percentage of firms reporting difficulty filling their vacant positions ticked up in September.”
“Meanwhile, the number of employees working in temporary help services—an important early indicator for hiring in other industries—continues to fall after peaking in March 2022 and the proportion of consumers who said jobs were ‘hard to get’ in The Conference Board Consumer Confidence Survey® increased. Looking ahead, we expect the Fed’s rate hikes to gradually slow job growth, with job losses likely to start in Q2 2024. Our latest US forecast sees the unemployment rate rising to 4.2 percent by the second half of 2024, corresponding to around 700,000 job losses. However, we expect the recession to be short-lived and jobs to quickly recover by the end of next year.”
Fed’s Logan: Restrictive financial conditions needed to bring down inflation
- Dallas Fed Pres. Logan speaking
- Continued restrictive financial conditions it will be necessary to bring down inflation.
- In setting policy rate, Fed must take account of financial conditions, which have taken substantially in recent months.
- If higher long-term rates are due to higher term premiums, there may be less need for Fed to raise rates.
- Higher term premiums have clear role in higher long-term rates, uncertain how big
- To the extent a stronger economy is behind rising long-term rates, Fed may need to do more.
- Attentive to wrists on both sides of Fed’s mandate. High inflation is the most important risk
- Progress on inflation encouraging but too early to be confident it is heading to Fed’s 2% target in a sustainable, timely way.
- Labor market is still very strong, wage is still solid.
- Output, spending have been surprisingly strong, outlooks for consumer are mixed
- It is important to stay focused on restoring price stability
- There is a lot of uncertainty over the trade-off with the unemployment rate
- It is important to stay focused on restoring price stability
- The China slowdown is something to watch
- Surprising strength of the economy creates risk for inflation. We have more work to do.
- Quite a bit of room for Fed balance sheet run off
- Financial conditions tightening have been rapid but orderly
- She has been thinking about how to square overall economy with Fed tightening so far
- Tends to think that monetary policy lags are shorter than others
- The bulk of economy is adjusting more quickly to monetary policy
- Fed’s focus and mine is the 2% inflation target
- Looking at financial markets and performance of economy, the long-term neutral rate may be higher
- Have seen tightening of bank lending standards, similar to what we expect and intend with policy tightening
Feds Jefferson:We need to move carefully to balance risk of tightening too much/too little
- Fed’s Jefferson speaking
- We need to move carefully to balance the risks of tightening too much or too little
- May be too soon to say confidently we have tightened enough.
- Mindful of lag effects of past rates as I consider whether we will need further policy tightening.
- Rising long-term yields in the past may have meant investors seek stronger economic momentum and need for higher for longer Fed rate path
- Mindful that changes in real yields can arise from changes investors view of risk, uncertainty.
- Will keep higher bond yields in mind in assessing future rate path.
- Recent inflation data encouraging, but inflation still too high.
- Core PCE prices will moderate further as labor market comes into better balance.
- Labor market remains tight, but labor demand is falling. Supply is improving.
- There is a path to restoring price stability without a large gain in unemployment.
- Expect further gradual easing of labor market conditions.
- I am particularly attentive to upside inflation risks from a strong economy, labor market, energy prices.
- Downside risks to economic activity include slowdown in China, and Europe
- It could be the case that rise in the long-run treasury yields reflects anticipation for strong growth
- Current policy is restrictive.
- Finding the right stance of policy is my concern.
- As a policymaker unmindful cumulative effects of past rate increases has NOT been felt
- We need to do our work to bring the inflation rate down before we can assess what long-run R-star is
- Cannot say if rate cuts might be needed next year yet.
- Our objective is for balance sheet policy to work in harmony with policy rate, but it depends on what is happening in the economy
- Need to be nimble with regard to what is happening in the economy
- Employment growth is a good thing
- We just want job growth to be consistent with path of inflation toward 2%
Fed’s Barr on regulation: Benefits of proposed higher bank capital outweighs the costs
- Fed’s Barr is the vice chairman for supervision
Fed’s Barr has put on his regulatory hat as vice chairman of supervision and says:
- Benefits of proposed higher bank capital outweighs the costs.
- Proposed higher capital requirements could raise funding costs for banks, but will enable them to absorb more losses.
- Post capital hikes would primarily impact banks trading, have limited impact on banks lending costs.
- Welcomes all comments on proposed rule to ensure that they accurately reflect risk.
Ex Fed Pres. Bullard: The story of US recession is not materializing
- Ex Fed Hawk Bullard on CNBC
- The story of US recession is not materializing
- Strong jobs report confirmed a reacceleration of the US economy
- Higher for longer for the Fed
- Yes we are getting some disinflation which is good, but core PCE at 3.8% is good but still nearly double the 2% target
- My hope is we contain inflation, get it down to 2% and then have a period of growth
- Banks have weathered the banking storm so far.
- Larger banks have not had problems.
- Banks are managing through risk
- Maybe one more rate hike. Being data dependent is appropriate.
- The risk is that inflation goes back up to over 4%.
- If it does the Fed may have to go to 6% to 6 1/2%. That is not priced in
US autoworkers to go on strike at Volvo Group-owned Mack Trucks
UAW at Volvo-owned Mack Trucks rejected a proposed five-year contract deal.
- Will go on strike at 7 am Monday, local time.
- The deal proposed a 19% pay hike.
US’ Schumer says disappointed by China’s lack of support towards Israel situation
- US Senate leader, Chuck Schumer, met up with China’s top diplomat, Wang Yi, in Beijing today
Schumer says that he is “disappointed by China’s statement that showed no sympathy or support for Israel during these troubled times”.Meanwhile, Wang Yi is responding to that by saying that he “hopes US can see China in a more objective way and manage existing contradictions more reasonably in order to get US-China relations back on track”.
It seems quite clear that even with these meet ups that relations between the two countries are still not going too well.
Wall Street Journal reports that Iran helped plot the attack on Israel
The Wall Street Journal (gated) with the report, citing senior members of Hamas and Hezbollah:
- Iranian security officials helped plan Hamas’s Saturday surprise attack on Israel
- gave the green light for the assault at a meeting in Beirut last Monday
- Officers of Iran’s Islamic Revolutionary Guard Corps had worked with Hamas since August to devise the air, land and sea incursions
- U.S. officials say they haven’t seen evidence of Tehran’s involvement
Secretary of State Antony Blinken in an interview on Sunday with CNN:
- “We have not yet seen evidence that Iran directed or was behind this particular attack, but there is certainly a long relationship.”
Israeli government says it decides to continue bombing Gaza, even if prisoners are killed
- Sky News is reporting
Sky News is reporting that the Israel government has made the decision to continue to bomb Gaza even if it kills the Israeli prisoners.
US earthquake – Seattle buildings swaying
Magnitude 4.5
- 3 km SW of Marrowstone, Washington state
- depth 55km
Israel massing 100,000 troops in southern Israel to neutralize Hamas’ military facilities
Statement from an Israeli Defense Force spokeperson to the effect that Israel is amassing 100,000 troops, tanks and more in southern Israel. The aim is to take away all military capabilities from Hamas.
Meanwhile a senior U.S. Defense official says that an Israeli ground invasion of the Gaza Strip will likely begin sometime in the next 48-72 hours.
Commodities
WTI crude oil settles at $86.38
- Up 3.59%
The price of WTI crude oil is settling at $86.38 up $3.59 on the day..
- The high price today reached $87.20
- The low price extended to $84.74
At session lows, the price tested the swing high going back to August at $84.85. Although the price dipped briefly below that level, momentum to the downside could not be sustained and the price bounced higher. That level will be a close support level going forward. Below that a swing area between $82.35 and $83.32 would be eyed.
Saudia Arabia willing to boost oil production if prices are high to win US agreement
- WSJ report
The WSJ’s Summer Said reports that Saudi Arabia has told the White House it would be willing to boost oil production early next year if crude prices are high. That would be part of a deal where Saudi Arabia would recognize Israel and get a defense pact with Washington.
The WSJ report said the US hopes to broker a deal in the next six months and that Israel, Saudi Arabia and the US have agreed on the broad contours of a deal. The deal may need Congressional approval and the US emphasized to Saudi Arabia that it would need to repair its image in the US, presumably by pumping more oil.
Australia agreed to ensure a stable supply of energy resources such as LNG, coal to Japan
Japan’s Economy, Trade and Industry Minister Yasutoshi Nishimura met in Melbourne with his Australian counterpart Don Farrell for the fifth Japan-Australia Ministerial Economic Dialogue. They were joined by Climate Change and Energy Minister Chris Bowen and Resources Minister Madeleine King.
Nishimura told reporters after the meeting that they “agreed to ensure a stable supply of resources such as LNG and a reliable investment environment” in Australia’s resources and energy sector, and further expand the cooperation in the sector to cover such resources as hydrogen and ammonia.
EU News
European indices off to a negative start for the trading week
- Major indices move lower
The major European indices are off to a negative start for the trading week. We can geopolitical risks sour the mood of stock buyers.
A snapshot of the closing levels shows:
- German DAX, -0.67%
- France’s CAC -0.55%
- UK’s FTSE 100 -0.03%
- Spain’s Ibex -0.92%
- Italy’s FTSE MIB -0.45%
Eurozone October Sentix investor confidence -21.9 vs -22.8 expected
- Latest data released by Sentix – 9 October 2023
- Prior -21.5
Germany August industrial production -0.2% vs -0.1% m/m expected
- Latest data released by Destatis – 9 October 2023
- Prior -0.8%; revised to -0.6%
A big chunk of the lower factory output owes to weaker energy (-6.6%) and construction (-2.4%) developments. If you strip those two out, production in industry was actually up 0.5% on the month.
SNB total sight deposits w.e. 6 October CHF 479.9 bn vs 476.3 bn prior
- Latest data released by the SNB – 9 October 2023
- Domestic sight deposits CHF 469.1 bn vs 466.1 bn prior
France central bank sees Q3 GDP growth of 0.1%
- Down from 0.5%
France’s central bank now sees growth in France at 0.1% in the Q3.
That is down from 0.5% in Q2
ECB’s de Guindos: Inflation to fall in the coming months
- Remarks by ECB vice president, Luis de Guindos
- But urges caution due to evolution of oil prices
- Expects current level of interest rates to contribute to price stabilisation
ECB’s Kazaks: The phase of rapid rate hikes is already behind us
- Remarks by ECB policymaker, Martins Kazaks
- Can currently count on the fact that we may pause
- So, any future rate hikes would be relatively small
Other News
Monday morning trade in securities and derivatives has been cancelled in Hong Kong
The morning trading session has been suspended given the typhoon signal given by the HK Observatory remained at 8 at 9 a.m. Hong Kong time (0100 GMT). The stock market will be shut for the rest of the day if a signal 8 is still in place by noon.
Workers at Chevron’s two LNG in Western Australia voted to restart strikes on Friday
Chevron says its continuing to work to draft an agreement based on recommendations a couple of weeks ago.
The latest is that workers at Chevron’s two liquefied natural gas facilities in Western Australia voted to restart strikes on Friday.
- “It’s disappointing but hardly surprising Chevron have welched on the deal given the bad faith they have shown bargaining with their workforce over the last year or so,” Offshore Alliance’s Brad Gandy said in a statement.
Japan likely won’t intervene to reverse yen downtrend – Japan ex-top FX diplomat
- Says Japan know trying to do so is a wasted effort so they won’t.
Japan former top currency diplomat Naoyuki Shinohara spoke with Reuters. Highlights:
Japan likely won’t seek to reverse the yen’s downtrend with exchange-rate intervention as recent falls reflect economic fundamentals, former top currency diplomat Naoyuki Shinohara told Reuters. There is no set rule or shared agreement among G7 advanced nations on what kind of currency moves are defined as “excess volatility” that justify intervention.
- “Usually, when you talk about excess volatility you have in mind a timeframe of several days or weeks,” rather than several months
- “Japanese authorities are well aware that they can’t reverse the market’s tide when the yen’s decline is driven by economic fundamentals,”
- “When you have steady yen falls over a protracted period, that’s usually a trend driven by fundamentals,”
- “If the recent weak yen is indeed a source of concern for Japan, the best way to deal with it would be for the BOJ tonormalise its ultra-loose monetary policy,”
- “The finance ministry ought to focus on responding to abrupt yen moves that are out of line with the broad trend,”
Japan has issued a tsunami advisory – Izu Island area (eastern Japan)
In response to the magnitude 5.4 earthquake off the coast earlier. Depth was 10km
Cryptocurrency News
Bitcoin price comfortable above 50% of 2023 market range, with NYDIG report acclaiming BTC as top performer
- Bitcoin price is up 68% since the January 1 low of $16,499, holding above the 50% of 2023 market range.
- NYDIG Q3 research shows BTC is the best-performing asset class of the year on asset class returns metrics.
- ETF continue to be top of mind for BTC potential drivers since BlackRock applied for BTC Spot Exchange-Traded Fund.
Bitcoin is sitting comfortably above the 50% Fibonacci Retracement at $24,217, the midline of the 2023 market range.Meanwhile, Stone Ridge subsidiary and holding company, NYDIG, has revealed interesting insights about BTC against other asset classes.
Bitcoin price 70% above 2023 lows
Bitcoin (BTC) price is up 68% since the year’s lows of $16,507, standing comfortably above the 50% Fibonacci retracement level of $24,217.The price got rejected from the 78.6% Fibonacci retracement at $28,628 on October 2.
Ripple developers announce completion of AMM testing, hint at automated trading coming soon to XRPL
- XRP price slipped nearly 5% on Monday, losing a crucial support line with price indicators nearing a bearish divergence.
- Amid SEC’s ongoing tiff with Ripple, Chief Financial Officer Kristina Campbell resigned this week.
- The altcoin, however, is finding more demand in the derivatives market, with Deribit set to launch XRP options trading.
XRP price on Monday might have corrected some of the gains it noted in the past few days, but Ripple developers are finding success with their AMM.
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