Round up of today's market news *

Nasdaq Plays Catch-up in US Equity Close

Closing changes in the US

Closing changes on the day:

S&P 500 down 0.6%
DJIA +0.1%
Russell 2000 -0.8%
Nasdaq Comp +1.3%

Closing changes for the week:

S&P 500 up 0.4%
DJIA +0.8%
Nasdaq Comp -0.2%

US September import prices +0.1% vs +0.5% expected

US September import and export prices

Prior was +0.5% (revised to +0.6%)
Export prices +0.7% vs +0.5% expected
Prior was +1.3% *(revised to +1.1%)

Year over year:

Import prices -1.7% vs -3.0% prior
Export prices -4.1% vs -5.5% prior

US October prelim UMich consumer sentiment 63.0 vs 67.2 expected

Preliminary UMich consumer sentiment data for October 2023

Prior was 68.1
Current conditions 66.7 vs 70.4 expected (71.4 prior)
Expectations 60.7 vs 65.5 expected (66.0 prior)
1-year inflation 3.8% vs 3.2% prior
5-10 year 3.0% vs 2.8% prior

JP Morgan analyst shrugs off the US CPI data: really not much going on

JPMorgan Asset Management Chief Global Strategist David Kelly was interviewed (Bloomberg TV) after the US CPI report.

The data is here ICYMI:

JPM analyst Kelly:

the CPI, I think it was close to … exactly on expectations
the one thing that seemed to be stronger than people had expected was hotels … that was one of the things that pushed up shelter costs

And if you take that as there’s there’s really not much else going on here

Meanwhile, we’re looking very closely atthe price of gasoline, because what’s happening is even though crude oilprices are holding in at a fairly high levels, we’ve seen refiner margins come crashing down. And so the price of a gallon of gasoline is now $0.19 lower than it was a month ago. And so I think that bodes well for for a better reading for October CPI.
So right now, I think we’re still on track … for CPI headline being a 2% or less in the fourth quarter of next year… that’s one year ahead of the Fed’s target. And that’s, you know, so overall, this report makes me I’m still very optimistic that inflation is coming down.

TD on “worries about a lack of demand for Treasuries”, could see a run to 5%

A note from TD also looks at the UST market, noting that dynamics there could soon see a run to 5%.

This week’s 3s, 10s, and 30s Treasury auction series was met with weaker demand
Such an occurrence is relatively rare, with just 11% of auction series since 2012 showing all three auctions tailing
This afternoon’s weak 30y auction (which tailed 3.7bp) also showed softening end-user demand, with dealers having to take 18% of the auction
The recent drop in end-user demand is concerning as dealer capacity to backstop auctions remains lower due to limited balance sheet availability. With investor conviction remaining extremely low as the market is caught between still-firm domestic fundamentals and geopolitical risk, the 30y auction appears to have further destabilized sentiment.
Treasury is likely to continue increasing auction sizes in coming months, bringing more 10y equivalent duration to market next year.We expect higher nominal and real rates to continue weighing on economic growth momentum, leading rates lower by year-end and in 2024.
In the near-term, however, worries about a lack of demand for Treasuries could allow rates to re-test recent highs, with 10s potentially making a run at the 5% mark.

Harker: Fed is likely to be done with rate hikes

Comments from the Philly Fed President
Supports higher-for-longer interest rate stance
Can’t say for low long rates will need to remain high
Sees steadily disinflation, falling below 3% this year
Growth to moderate next year but he doesn’t see a recession
Does not expect to see mass layoffs
Auto strikes and renewed student loan payments will weigh on economy
Expects unemployment rate to rise to about 4%
Banks tell Fed there is almost no activity for first-time home buyers
Seeing some increase in consumer credit trouble but not a major concern yet
Prefers core inflation measures to headline
Commercial real estate risks are a concern, cites downtown office space

UAW Fain: Not announcing any new expansion of strikes today

…but ready to strike at any time

UAW President Shawn Fain is saying:

The UAW is not announcing any new expansion strikes today. However, he warns that they are ready to strike at any time.
We are going for a deal soon
Going forward, the union will be striking plants with little notice

Shares of Ford are down $0.08 or -0.67% at $11.92. GM shares are down $0.32 or -1.06% of $30. For the trading week, Ford shares are down -0.66%, while GM shares are down -2.88%.

US bonds – “We are not done testing a 5% yield on the 10-year note or 30-year bond”

Media reports with comments from Marc Chandler, chief market strategist at Bannockburn Global Forex.

Chandler discussing the path to 5%.

“The bond market is still king,”

On the post-CPI broad-based selloff in Treasurys

appear to be undercutting the Fed’s main arguments for avoiding another rate hike
Thursday’s Treasury-market moves are being driven more by “what seems to be inflation and the strength of the economy, rather than term premium, which means the market may not have done some of the heavy lifting that some Fed officials have been suggesting.”
“We are not done testing a 5% yield on the 10-year note or 30-year bond,”

US to close ‘loophole’ that gives Chinese companies back door access to US AI chips

Reuters with the report, citing four people familiar with the matter

The Biden administration isconsidering closing a loophole that gives Chinese companiesaccess to American artificial intelligence (AI) chips through units located overseas
rules are set to be tightened in the coming days

US politics – Scalise withdrawing from the Speaker race. Failed to get enough support

Scalise:

“I’m withdrawing my name as a candidate for the speaker designee.”
Adds that some folks need to look in the mirror and decide if they are going to get back on track.

BOC’s Macklem: We are not expecting a recession

Comments from Macklem

Higher long-term bond yields are not a substitute for down what needs to be done to get inflation back down to target

Macklem is more-hawkish than the Fed with this comment. BOC will be releasing economic projections on October 25 and he said “we’re not going to be forecasting a serious recession”

We are seeing clear signs mon pol is working to rebalance supply and demand but inflation is still too high
We’re not really seeing downward momentum in underlying inflation and that is a concern
Strength of Canadian economy means people are getting wage increases that will help make it easier to digest impact of higher mortgage rates after renewal

Gold soars above $1925 amid escalating Middle East tensions, dovish Fed

Gold prices (XAU/USD) surge, trading at $1,929.20, reflecting a gain of over 3% amidst the escalating Israel-Palestine conflict.
Shift from aerial to ground operations in Gaza by Israel intensifies geopolitical tensions, bolstering safe-haven assets.
Deteriorating US Consumer Sentiment and dovish remarks from Philadelphia Fed President Patrick Harker apply pressure to US Treasury yields.

Gold is sustaining an outstanding rally on Friday as geopolitical tensions rise in the conflict between Israel and Palestine. Traders seeking safety flock towards the yellow metal amid times of uncertainty, while the Greenback is also advancing.The yellowe metal is trading at $1,929.20 a troy ounce, gains more than 3%, after bouncing from daily lows of $1,868.69

WTI crude oil extends above $87 per barrel

Crude oil is running higher. Technical turn more bullish. Price above $87 now

The price of WTI crude oil is extending above the $87 level to a high of $87.37.

Oil prices have surged today following the U.S.’s enhancement of sanctions against Russian crude exports, amplifying supply anxieties in an already constrained market.

The U.S. targeted tankers carrying Russian oil priced above the G7’s $60 per barrel cap, a move to tighten restrictions in response to Russia’s invasion of Ukraine.The development, coupled with the ongoing conflict between Israel and Hamas, has stirred concerns over potential disruptions to Middle Eastern oil exports.

Despite these geopolitical tensions, OPEC maintains its global oil demand growth forecast, attributing its optimism to a resilient world economy and anticipated demand spikes in China.Iran’s oil minister is now out saying that he is predicting the price of oil will reach $100 per barrel due to the Middle East situation.

Baker Hughes US oil rig count 501 vs 497 prior

Baker Hughes rig count for the week ending October 13th.

Oil rigs 501 vs 497 last week
Gas rigs 117 vs 118 last week
Total rigs 622 vs 619 last week

Oil rallies back on the week on Middle East fears

Israel’s threat to attack Gaza in the next 24 hours is leading to a surge in oil prices

Oil is up nearly 4% on the day with WTI crude now seen up to above $86 in a big surge in European morning trade.This comes as Israel issued a threat and instructed civilians in Gaza to evacuate the city and relocate to the south within the next 24 hours.As such, markets are responding by seeking shelter ahead of the weekend it would seem.

Looking at other commodities, gold is also up 1% on the day to $1,887 as safety bets are preferred. The yellow metal is helped out by a continued rebound from its 200-week moving average last week near $1,810 but the developments between Israel and Palestine have proven rather timely as well.

Brent crude oil – the demand worries vs. supply worries continue to play out

As always

Oil gained in Thursday trade, those more worried about supply issues were the winners for the day.

The supply worries centre on OPEC/Russia output cuts and the ramifications of the current turmoil in the Middle East.

EU News

Major European indices close the session down on the day

Mixed results for the week

The major European stock indices are closing the day lower. The German Dax was the weakest.

German Dax -1.55% at 15186.67
France CAC -1.42% at 7003.54
UK’s FTSE 100 -0.59% at 7599.59
Spain’s Ibex -1.10% at 9232.91
Italy’s FTSE MIB -0.92% at 28230.89

For the trading week, the indices are closing with mixed results:

German Dax, -0.28%
France CAC, -0.80%
UK’s FTSE 100 +1.40%
Spain’s Ibex unchanged
Italy’s FTSE MIB +1.5%

Spain September final CPI +3.5% vs +3.5% y/y prelim

Latest data released by INE – 13 October 2023
HICP +3.3% vs +3.2% y/y prelim

France September final CPI +4.9% vs +4.9% y/y prelim

Latest data released by INSEE – 13 October 2023
HICP +5.7% vs +5.6% y/y prelim

Switzerland September producer and import prices -0.1% vs -0.2% m/m prior

Latest data released by SECO – 13 October 2023

Looking at the breakdown, producer prices were flat on the month while the slight fall was due to import prices (-0.2%). Overall, it still points to further moderation in price pressures.

German economy to show another mild decline in Q3 – economy ministry

Remarks by Germany’s economy ministry in its monthly report

Another mild decline in GDP is expected for Q3
But momentum expected to return at the end of the year
For now, no noticeable momentum in foreign trade in the coming months at least

ECB’s Lagarde: We will return inflation to 2%, it is happening

Comments from the ECB President
There is more policy lag in the pipeline from past hikes

ECB’s Visco: Uncertainty looms great on global economy

Remarks by ECB policymaker, Ignazio Visco

Markets worried about Italy’s inability to grow
But Italian economy has potential to grow more
No signs that Italian spreads are at a level that requires ECB action

BOE’s Bailey: Last policy decision was a tight one

Remarks by BOE governor, Andrew Bailey

Future decisions will continue being tight
Policy is restrictive and it has to be
Sees progress on inflation but there is still work left to do

Other News

China September CPI +0.2% m/m (vs. expected +0.3%)

China’s run of low consumer inflation continues. And PPI continues to deflate y/y. The m/m PPI was +0.4%, rising oil a factor pushing it higher.

China September M2 money supply +10.3% vs +10.7% y/y expected

Latest Chinese credit data for September 2023 has been released

Prior +10.6%
New yuan loans ¥2.31 trillion vs ¥2.50 trillion expected
Prior ¥1.36 trillion

China September USD dollar denominated Exports -6.2% y/y, Imports -6.2%

China trade balance data for September 2023

Trade Balance in USD terms 77.7bn

expected 70.0bn, prior 68.4bn
in yuan terms a surplus of 558.7bn

Imports -6.2% y/y

expected -6.0%, prior -7.3%
in yuan terms -0.8% y/y

Exports -6.2%

expected -7.6%, prior -8.8%
in yuan terms -0.6% y/y

China January – September yuan denominated exports +0.6% y/y, imports -1.2% y/y

Some info on Chinese trade data dribbling out, but not the main numbers yet.

January – September yuan denominated

exports +0.6% y/y,
imports -1.2% y/y,
trade balance is a surplus of 4.4tln

PBOC says it still has ample room to support the economy

Remarks by PBOC official, Zou Lan, at a press conference
Closely watching effectiveness of policy steps
Recent interest rate cuts for property sector have achieved significant results
Will implement monetary policy in a precise and forceful manner

Federal Reserve Chair Powell and PBOC governor Pan Gongsheng met on October 12

A statement from the People’s Bank of China:

Federal Reserve Chair Powell and People’s Bank of China Governor Pan Gongsheng met on October 12
Exchanged views on the global economy and cooperation between the two banks
The two met in Morocco

Australian financial media says One in five borrowers is ‘screwed’

Australian Financial Review with the headline,

One in five borrowers is ‘screwed’

Some of the ‘highlights’ of the report, low lights really, things are not looking promising:

The Reserve Bank of Australia likes to spin that “most” borrowers are fine, but between 15 and 20 per cent are in trouble.
13 %of borrowers cannot afford to make their debt repayments after living costs, up from a mere 3 per cent last year
while the RBA and media are crowing about how Aussie households and businesses can comfortably wear higher interest rates, which is true, the tails of this distribution are still getting crushed.
sub-prime home loans originated by non-banks, the news is worse with the 30 days arrears rate leaping from 2.5 per cent to almost 4 per cent.
The RBA also expressly warns about the coming high-risk debt default cycle and pain for non-bank lenders that have financed dodgier businesses and households.

New Zealand data – September Card retail sales -0.8% m/m (prior +0.7%)

New Zealand Electronic Retail Card Spending for September 2023

-0.8% m/m
prior +0.7%
+1.6% y/y
prior +3.7%

New Zealand September Manufacturing PMI 45.3 vs. prior 46.1

BusinessNZ / BNZ September Manufacturing PMI remains in deep contraction.

New orders fell to 44.9 from 46.6 in the prior month

Bank of New Zealand senior economist Doug Steel:

“It is always difficult to know the precise drivers of any particular PMI result but judging by respondent comments falling sales, rising costs, and election uncertainty are currently all part of the mix”.

New Zealand election on Saturday – change of government expected

The election in New Zealand is on Saturday.The incumbent Labour Party is seeking a third term but is expected to lose to the centre-right National Party/coalition partners.

National looks likely to win the largest proportion of votes in the election, but polls indicate that it will need at least one minor party, and maybe two, to form a government. Polls indicate New Zealand First, led by Winston Peters, will hold the balance of power.

Japan households’ inflation expectation rose slightly in September

The latest from the BOJ’s survey on inflation expectations

86.8% of households expect prices to rise a year from now (previously 86.3% in June)
Japanese households expect inflation to rise by average of 10.7% a year from now (previously 10.5%)
80.7% of households expect prices to rise 5 years from now (previously 79.0%)
Japanese households expect inflation to rise by average of 8.0% 5 years from now (previously 7.5%)

BOJ’s Ueda: There is no big change to my view on the global economic outlook

Ueda met with other officials at G7 and G20 this week
Ueda said YCC tweak in July was aimed at pre-empting market volatility that would emerge from maintaining this framework

Monetary Authority of Singapore maintains prevailing rate of appreciation of policy band

MAS announces it’ll now meet 4 times a year instead of 2.

Monetary Authority of Singapore, Singapore’s central bank, leaves policy settings unchanged, as expected.

will maintain the prevailing rate of appreciation of the S$NEER policy band
will be no change to its width and the level at which it is centred
Will be shifting to a quarterly monetary policy statement schedule from 2024
Statements will be released in January, April, July, and October
MAS continues to uphold a medium-term orientation in its policy formulation to secure low and stable inflation
The next monetary policy statement will be released in late January 2024
Singapore’s GDP growth is expected to improve gradually over 2024
MAS core inflationhas slowed and is projected to broadly decline over the course of 2024
There are bothupside and downside risks to inflation
Shocks to globalfood and energy prices or domestic labour costs could bring aboutadditional inflationary pressures
Sharper-than-expecteddownturn in the global economy could induce a general easing of cost and price pressures
CPI-all items inflation is projected to average between 3.0–4.0% in 2024
In 2024, mas core inflation should be on a broad moderating trend
All items inflation forecast to pick up slightly in the remaining months of 2023
For 2023 as a whole, CPI-all items inflation should average around 5%, down from 6.1% the year before

SG data released:

Q3 GDP +0.7% y/y (expected +0.4%) – flash estimate

+1.0% qtr/qtr seasonally adjusted rate – flash estimate
+1.0% qtr/qtr seasonally adjusted rate – flash estimate

Cryptocurrency News

Ripple whales adding 90 million XRP in two weeks could trigger a recovery in XRP price

XRP price is trading at $0.48, closing in on invalidating the critical support line of $0.47.
Ripple CTO stated that SEC did not show favoritism but corruption by clearing Ethereum from being a security.
Ripple proponent John Deaton also called out the US House FSC for being ineffective in its oversight of the SEC Chair.

XRP price decline is certainly connected to the broader market cues, but it is also connected to the rest of the Ripple investors. Among them were addresses that could manage to return profits sooner than one would expect.

Daily Digest: Ripple CTO calls SEC corrupt, whales increase holdings

Ripple Chief Technology Officer (CTO) David Schwartz took to X, formerly Twitter, to counter the Cardano founder Charles Hoskinson. Earlier this week, during an AMA session on the social media platform, Hoskinson spoke about the conspiracy of ETHgate, according to which Ethereum has been given a free pass by the Securities and Exchange Commission (SEC).

Cardano’s TVL soars with development activity, ADA price lags

Cardano network’s Total Value Locked surpassed $150 million, reflecting positive usage from decentralized applications.
This month, Cardano was the top-performing blockchain in terms of development activities, based on Santiment data.
ADA price remains 92% below its all-time high of $3 seen in September 2021.

Cardano, a well-known Layer-1 Ethereum competitor, is inching closer to a new 2023 peak in terms of total value locked (TVL) even as its native token, ADA, lingers far from its all-time high. Recently, Cardano topped in monthly development activity, beating Polkadot and Kusama.

Cardano chain sees development activity, TVL increase

Cardano’s Total Value Locked (TVL) has surpassed $151 million at the time of writing, signaling an increase in the network’s utilization by decentralized applications.Based on DeFiLlama figures, Cardano is approaching the 2023 peak of around $200 million reached in July. An all-time high was achieved in March 2022, when the TVL went beyond $300 million.

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Round up of today’s market news

ByBilals Tech

North American News