North American News
US Indices Fall Ahead of Jobs Report
US major indices closed lower on Thursday, with the Dow and Russell 2000 leading the decline ahead of Friday’s pivotal US jobs report. Modest losses were recorded across the board, reflecting investor caution as they awaited key labor market data.
Final Numbers:
- Dow Jones fell 184.73 points (-0.44%) to 42,011.59.
- S&P 500 slipped 9.60 points (-0.17%) to 5,699.94.
- NASDAQ edged down 6.65 points (-0.04%) to 17,918.48.
- Russell 2000 dropped 42.85 points (-0.68%) to 2,180.14.
Weekly Performance (with one day left):
- Dow: -0.71%
- S&P 500: -0.67%
- NASDAQ: -1.11%
- Russell 2000: -2.00%
Bond Market: Yields continued to rise amid stronger-than-expected ISM Non-Manufacturing data, signaling potential economic resilience ahead of the jobs report.
- 2-year yield: 3.707% (+7.0 bps)
- 5-year yield: 3.631% (+7.8 bps)
- 10-year yield: 3.851% (+6.6 bps)
- 30-year yield: 4.185% (+5.4 bps)
For the week, yields have climbed:
- 2-year: +14.2 bps
- 5-year: +12.4 bps
- 10-year: +9.8 bps
- 30-year: +8.1 bps
Upcoming Jobs Report: Expectations are set for 140K new jobs (down from 142K in the prior month), with unemployment anticipated to remain steady at 4.2%. Average hourly earnings are forecast at 0.3% MoM and 3.8% YoY.
US September final S&P Global Services PMI 55.2 vs 55.4 prelim
- The Sept 2024 final PMI survey from S&P Global
- Prior was 55.7 (best in two years)
- Prelim was 55.4
- Composite 54.0 vs 54.4 prelim
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence:
“US service sector businesses reported a strong end to the third quarter, with output continuing to grow at one of the fastest rates seen over the past two-and-a-half years. After GDP rose at a 3.0% rate in the second quarter, a similar strong performance looks likely in the three months to September.
“Encouragingly, inflows of new business in the service sector grew at a rate only marginally shy of August’s 27-month high. Lower interest rates have already been reported by survey contributors as having buoyed demand, notably for financial services which, alongside healthcare, remains an especially strong performing sector.
“Companies have become increasingly concerned about the outlook, however, with business confidence slumping in September amid uncertainty caused by the upcoming election as well as perceptions of rising recession risks.
“The upturn has also become increasingly uneven, with growth wholly dependent on the service sector as manufacturing has slipped deeper into a decline in September. This factory malaise is showing some signs of spilling over to the service sector, subduing growth in particular for industrial services.
“It therefore remains to be seen how the Presidential Election will affect growth, and the extent to which lower interest rates might help revive struggling sectors such as industrial goods and services. Clearly there are both upside and downside risks to growth.
“Meanwhile, the inflation signals from the survey point to reviving price pressures, principally linked to stubbornly elevated wage growth, which could temper the Fed’s enthusiasm for further aggressive rate cutting.”
US September ISM services 54.9 vs 51.7 expected
- US September 2024 ISM services
- Business activity index 59.9 vs 53.3 prior
- Employment 48.1 vs 50.2 prior (lowest since June)
- New orders 59.4 vs 53.0 prior (highest since Feb 2023)
- Prices paid 59.4 vs 57.3 prior (highest since Jan)
- Supplier deliveries 52.1 vs 49.6 prior
- Inventories 58.1 vs 52.9 prior
- Backlog of orders 48.3 vs 43.7 prior
- New export orders 56.7 vs 50.9 prior
- Imports 52.7 vs 50.3 prior
- Inventory sentiment 54.0 vs 54.9 prior
Comments in the report:
- “Overall, economic factors are somewhat stable in the last month. Volatility was limited, based more on seasonal aspects than geopolitical issues or election season. That stability may be short-lived due to looming port labor issues heading into October.” [Accommodation & Food Services]
- “Business has been flat over the past three to six months, with concerns over growth in the near term.” [Agriculture, Forestry, Fishing & Hunting]
- “Housing construction continues to struggle with high interest rates. While the recent half-point cut is encouraging, it may take another 150 basis points to move the needle in sales. Labor and heating, ventilation and air conditioning (HVAC) regulations continue to be a drag on construction last month.” [Construction]
- “Interest rates in both the housing and auto markets have been steadily declining, leading to a slight increase in auto and home loan applications.” [Finance & Insurance]
- “Back orders from manufacturers have increased, resulting in supply constraints.” [Health Care & Social Assistance]
- “New projects have not been consolidated in the U.S., which has led my organization to cut costs, especially by dismissing employees from departments with a lower activity volume.” [Information]
- “There is concern over the economy, and it feels like a lot of people are waiting to see which way the election goes in November before making a solid plan for 2025 and beyond.” [Professional, Scientific & Technical Services]
- “Prices remaining mostly steady, with a significant increase in fiscal year-end spending.” [Public Administration]
- “Starting to see positive year-over-year change in sales. Slow but steady.” [Retail Trade]
- “Sales have slowed a bit, with customers possibly holding back on new projects and awaiting the outcome of the presidential election.” [Wholesale Trade]
US weekly initial jobless claims 225K versus 220K expected
- US initial jobless claims for the week ending September 28, 2024 and continuing claims for the week ending Sept 21
- Prior week 218K (revised to 219K)
- I4- week moving average initial jobless 224.5K vs 224.75K
- Continuing claims 1.826M vs 1.832M expected.
- Prior continuing claims 1.834M (revised to 1.827M)
- 4-week moving average continuing claims 1.829M versus 1.836M last week.
US factory orders for August -0.2% versus 0.0% expected
- US factory orders and durable goods orders for the month of August
- Prior month: 5.0%
- Factory orders -0.2% versus 0.0% expected
- Factory goods orders ex transportation -0.1% versus +0.4% preliminary. Last month +0.3%
- Durable Goods orders 0.0% vs 0.0% preliminary. Last month was 9.9%. Durable goods have been up six of the last seven months
- Durable Goods ex transportation 0.5% vs 0.5% preliminary. Last month -0.1%
- Durable Good ex defense -0.2% versus -0.2% preliminary. Last month +10.3%
- Durable goods nondefense capital goods orders ex-air +0.3% versus 0.2% preliminary. Last month -0.2%
Highlighted summary:
- New Orders: Decreased by $1.3 billion (0.2%) to $590.4 billion in August, following a 4.9% increase in July. Down three of the last four months
- Shipments: Decreased by $3.1 billion (0.5%) to $590.1 billion, after a 0.8% increase in July. Shipments fell after two consecutive monthly increases
- Unfilled Orders: Increased by $5.0 billion (0.4%) to $1,391.4 billion, with an unfilled orders-to-shipments ratio of 6.87, up from 6.76 in July. Unfilled orders have been up for 48 of the last 49 months.
- Inventories: Increased by $1.2 billion (0.1%) to $860.2 billion, following a virtually unchanged July, with an inventories-to-shipments ratio of 1.46, up from 1.45 in July. Inventories have been up six of the last seven months
Other details:
- Unfilled Orders: Increased by $5.0 billion (0.4%) in August to $1,391.4 billion, led by transportation equipment, which rose $4.2 billion (0.5%) to $896.5 billion.
- Inventories (Durable Goods): Increased by $0.4 billion (0.1%) to $529.7 billion in August, driven by transportation equipment, which rose $0.2 billion (0.1%) to $172.3 billion.
- Inventories (Nondurable Goods): Increased by $0.8 billion (0.2%) to $330.5 billion in August, led by petroleum and coal products, which rose $0.4 billion (0.8%) to $47.9 billion.
- By Stage of Fabrication:
- Materials and supplies: Durable goods up 0.3%, nondurable goods up 0.5%.
- Work in process: Durable goods up 0.1%, nondurable goods down 0.7%.
- Finished goods: Durable goods down 0.1%, nondurable goods up 0.4%.
US September Challenger layoffs 72.821K vs 75.891K prior
- Latest data released by Challenger, Gray & Christmas, Inc. – 3 October 2024
- Challenger layoffs 72.821K vs 75.891K prior.
U.S.-based employers announced 72,821 cuts in September, a 4% decrease from the 75,891 cuts announced one month prior. It is up 53% from the 47,457 cuts announced in the same month in 2023, according to a report released Thursday from global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc.
In the third quarter, companies announced plans to cut 174,597 jobs, down 16% from the 177,391 cuts announced in the second quarter of this year. It is up 19% from the 146,305 cuts announced in the same quarter of 2023.
For the year, companies have announced 609,242 job cuts, up 0.8% from 604,514 announced during the same period last year. Though less than a percentage point separates them, this is the first time this year that year-to-date cuts are higher than those tracked during the same period in 2023.
“We’re at an inflection point now, where the labor market could stall or tighten. It will take a few months for the drop in interest rates to impact employer costs, as well as consumer savings accounts. Consumer spending is projected to increase, which may lead to more demand for workers in consumer-facing sectors.
“Layoff announcements have risen over last year, and job openings are flat. Seasonal employers seem optimistic about the holiday shopping season. That said, many of those who found themselves laid off this year from high-wage, high-skill roles, will not likely fill seasonal positions,” said Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc.
Tesla to recall over 27,000 Cybertruck vehicles
- Tesla to recall 27,185 Cybertruck vehicles in the U.S. due to rear view image visibility issues, says NHTSA.
Tesla to recall over 27,000 Cybertruck vehicles, NHTSA says. Tesla is recalling 27,185 Cybertruck vehicles in the U.S. as a delayed rear view image reduces visibility behind the vehicle, the U.S. National Highway Traffic Safety Administration said on Thursday.
Federal Reserve rate cuts under threat from US port strike
- S&P Global with the warning – say there has already been a higher inflation impulse
S&P Global Market Intelligence comments were reported in the Wall Street Journal (gated).
In brief:
- many importers and manufacturers pulled forward orders to try to get ahead of the looming East Coast port strike now under way
- if not resolved soon, the strike could eventually affect the shipping of 40% to 50% of U.S. imports
- disruptions would surely put upward pressure on goods prices
- in turn complicating the Federal Reserve’s ambition to wind down its fight against inflation
- higher shipping costs to the East Coast in anticipation of the strike have already contributed an inflationary impulse
Canada S&P Global services PMI falls to six-month low
- Canada Services PMI slumps to 46.4 in September, worst contraction since March
- Services PMI drops to 46.4 from 47.8, signaling accelerating contraction
- New business falls at fastest clip since December 2020
- Employment declines sharply, most since July 2020
- Inflation pressures ease, but remain elevated
- Firms pin hopes on future rate cuts to boost growth
Paul Smith, Economics Director at S&P Global Market Intelligence, said:
“Canada’s service sector endured a challenging month in September, with activity and new business volumes declining markedly and job losses registered for a second month in a row. Moreover, rates of contraction accelerated as market conditions deteriorated since August. This subdued environment subsequently helped to explain why inflation rates eased to their lowest levels in the past three-and-a-half years.
“The combination of softening labour market conditions, slower inflation and declining output adds support to the Bank of Canada’s policy of pursuing looser monetary conditions. Expectations are also clear amongst firms for further rate cuts in the coming months, with these seen as key in helping stimulate growth of sales and activity over the coming year.”
Commodities
Gold Climbs on Geopolitical Risks as Traders Await US Jobs Data
Gold surged from $2,638 to $2,659 on Thursday, driven by escalating tensions between Israel and Iran, as well as higher US Treasury yields. Despite softer labor market data, strong ISM Services PMI figures and a rising US Dollar Index (DXY) capped further gold gains. The DXY climbed 0.35% to 101.95, tempering expectations for a significant November rate cut.
Key Market Movers
- Geopolitical Tensions: Rising fears over Israel’s military moves into Lebanon following Iran’s missile attacks boosted demand for safe-haven assets like gold. US President Joe Biden’s remarks about possible strikes on Iranian oil facilities also fueled bullish momentum for the precious metal.
- Economic Data: Initial jobless claims increased to 225K, above estimates, indicating a softening labor market. Meanwhile, the ISM Services PMI for September expanded to 54.9, reflecting improved business activity. Factory Orders for August contracted by -0.2%, missing expectations.
- Fed Commentary: Fed officials, including Atlanta Fed’s Raphael Bostic and Chicago Fed’s Austan Goolsbee, highlighted inflation’s proximity to the Fed’s target and hinted at potential easing in policy over the next year. The odds of a 25 bps rate cut stand at 66.7%, with the likelihood of a 50 bps cut dropping to 33.3%.
Outlook: Gold could experience heightened volatility as investors focus on the upcoming Nonfarm Payrolls report on Friday, which is expected to show 140K new jobs in September. Geopolitical developments and shifting Fed policy expectations will continue influencing the market sentiment for gold.
US crude oil settled at $73.71
- Up $3.61 or 5.15%
The price of crude oil futures are settling at $73.71. That is up $3.61 or 5.15%. The high price reached $73.92. The low price today reached $70.56.
Looking at the daily chart above, the price is trading at the highest level since September 3, and above the 38.2% retracement of the move down from the July 5 high. That high price extended all the way up to $84.49. The most recent low was on September 9 at $65.29.
OPEC Sept output fell 390k bpd on Libyan outages – survey
- Reuters’ secondary sources survey
Reuters is out with its latest secondary sources survey of OPEC oil output and it has production down 290k barrels per day in the month to 26.14 mbpd.
Libyan output was down 300k bpd with the remainder of the bloc producing an additional 10k bpd. The survey also found that Iraq was still pumping 90k bpd above quota, news that will irk other OPEC members. Overall, members subject to quotas pumped 130k bpd above target.
Libya set to restart production from largest oil field
- Libya’s largest oil field to resume output, impacting global crude prices. Stay tuned for volatile market shifts.
Headlines via the terminal
- LIBYA TO RESUME OIL PRODUCTION TODAY
- SAYS OIL MINISTER LIBYA’S LARGEST OIL FIELD TO TO RESUME OUTPUT THURSDAY
EU News
Eurozone September final services PMI 51.4 vs 50.5 prelim
- Final data released by HCOB – 3 October 2024
- Services PMI 51.4 vs 50.5 expected and 52.9 prior.
- Composite PMI 49.6 vs 48.9 expected and 51.0 prior.
Key findings:
- HCOB Eurozone Composite PMI Output Index at 49.6 (Aug: 51.0). 7-month low.
- HCOB Eurozone Services PMI Business Activity Index at 51.4 (Aug: 52.9). 7-month low.
- First month since December 2023 that contraction is seen in all big-three eurozone economies.
Comment:
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“At first glance, the services sector in the eurozone seems to be holding up fairly well. It’s still growing, and the slowdown is not too steep just yet. But when you dig a little deeper and look at individual countries, the picture is not as rosy – except for Spain. Here, we are rubbing our eyes in amazement. Service providers there are booming, with the index shooting up to 57 points.
The situation in the other three leading eurozone economies is quite different. In France, service providers’ business activity slowed down after the Olympics effect and in Germany and Italy, growth almost hit a wall in September. Even if Spain manages to avoid getting pulled down by the struggles of its neighbours, the eurozone’s services sector as a whole seems to be headed for more sluggish growth. On the ground, most service sector employees have not really felt the pinch yet. In fact, the hiring rate picked up in Spain and France, and even in Italy, jobs growth only dipped slightly.
It is Germany where things look bleakest, with companies there actually cutting staff. This is where the recession in manufacturing is making itself felt, as in this environment the corresponding companies are placing fewer orders with the service sector. The situation in the service sector in the eurozone will continue to deteriorate. This is indicated by the decline in new business.
For the first time since February, it has fallen in the eurozone compared to the previous month. The development in Germany and France is similar. Factoring in the ongoing contraction in industry, the eurozone economy is likely to have grown only at a marginal rate in the third quarter. Our GDP nowcast model, which takes into account the PMI indicators, also points to only minimal growth.”
Eurozone August PPI +0.6% vs +0.3% m/m expected
- Latest data released by Eurostat – 3 October 2024
- Eurozone PPI M/M 0.6% vs 0.3% expected and 0.8% prior (revised to 0.7%)
- Eurozone PPI Y/Y -2.3% vs -2.4% expected and -2.1% prior (revised to -2.2%)
Germany September final services PMI 50.6 vs 50.6 prelim
- Final data released by HCOB – 3 October 2024
- Final Services PMI 50.6 vs. 50.6 expected and 51.2 prior.
- Final Composite PMI 47.5 vs. 47.2 expected and 48.4 prior.
Key findings:
- HCOB Germany Services PMI Business Activity Index at 50.6 (Aug: 51.2). 6-month low.
- HCOB Germany Composite PMI Output Index at 47.5 (Aug: 48.4). 7-month low.
- Growth expectations slump to lowest in a year.
Comment:
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“The services sector is starting to lose its role as an anchor of economic stability. Growth in the sector has slowed for the fourth month in a row, nearly coming to a halt in September. What is really worrying is the sharp drop in new orders, which had already lost a lot of momentum over the previous three months. If this downward trend keeps up, the situation in the services sector may get worse before getting better.
Service providers are still feeling the pinch from high costs, though the pressure has eased quite a bit, now at its lowest since early 2021. This is not necessarily because wage increases have slowed down, but more likely due to the sharp drop in oil and gas prices in September as well as lower financing costs. The struggles in the industrial sector are starting to spill over into services.
Many service providers work directly with manufacturing companies, and as the latter tighten their belts, outsourced services are often the first thing on the chopping block. As a result, service providers have been cutting staff over the past three months, and the pace of layoffs sped up in September.
Confidence in the sector has taken a hit too. Some of the surveyed businesses are worried about a recession and a deeper slump in manufacturing. And they are not wrong to be concerned. Our GDP estimates, which factor in the HCOB PMI, suggest that the economy shrank again in the third quarter after contracting in the second, and the momentum is downwards.”
French September final services PMI 49.6 vs 48.3 prelim
- Latest data by HCOB – 3 October 2024
- Services PMI 49.6 vs 48.3 expected and 55.0 prior.
- Composite PMI 48.6 vs 47.4 expected and 53.1 prior.
Key findings:
- French services economy ends third quarter with marginal contraction.
- New orders fall slightly and firms make strong dent to backlogs of work.
- Input cost inflation sinks to 42-month low; output prices unchanged.
Comment:
Commenting on the PMI data, Dr Tariq Kamal Chaudhry, Economist at Hamburg at Hamburg Commercial Bank, said:
“The Olympic euphoria has faded: Following the conclusion of the Olympic and Paralympic Games, the service sector has lost its growth momentum. The HCOB PMI for services dropped sharply in September, falling back into contraction territory at 49.6 points. Declining customer numbers, reduced willingness to spend, and uncertainty were cited by surveyed companies as the main reasons for the downturn in activity.
French service providers continue to struggle with high costs. Although the rise in input costs has slowed since the beginning of the year, weak demand has not been enough to bring prices down. The gap between input costs and output prices remains, indicating that increased costs have only been partially passed on. Some service providers reported offering discounts through promotions in an effort to boost sales.
The outlook for French service providers remains mixed. While order volumes at home and abroad shrank, companies are surprisingly more optimistic about future activity. The corresponding index saw a significant rise, reaching its highest level since July 2022. This confidence is partly attributed to recent ECB rate cuts. As a result, employment remains on an upward trajectory.”
Italy September services PMI 50.5 vs 51.0 expected
- The latest data from HCOB – 3 October 2024
- Services PMI 50.5 vs. 51.0 expected and 51.4 prior.
- Composite PMI 49.7 vs. 50.8 prior.
Key findings:
- Services activity rises marginally and at slowest pace seen in 2024 so far.
- New business volumes down for second month in a row.
- Jobs growth sustained.
Comment:
Commenting on the final PMI data, Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, said:
“Stagnation in September. The latest HCOB Composite PMI for Italy’s private sector economy signals an adverse development at the end of the third quarter, with an index value dipping into contraction territory for the first time of the year, down to 49.7. This trend seems to be in line with recent developments in struggling peers Germany and France.
Both manufacturing and services contributed to the slide in the PMI, with manufacturing declining at a faster rate on the month and services expanding only marginally. New business opportunities, both at the total and international levels, are struggling to gain momentum in Italy’s service sector. For the second consecutive month, there has been a decline in new business, with panellists noting subdued sales conditions.
However, activity remains slightly positive, and in this context, firms continued to make modest efforts to increase their staffing levels. With outstanding business declining for a year and new business under growing pressure, it’s uncertain how long firms can maintain their current hiring practices. Cost push inflation seems to remain a problem for Italy’s service providers. Firms are mentioning wages and energy as main drivers, but they struggle passing these costs on to customers, as output prices only increased marginally.
Italy’s service providers seem more optimistic about the future. After confidence deteriorated sharply over the last two months, September survey data regarding the near-term outlook showed an uptick. These hopes are tied to expectations of an improving economic environment and attracting new customers.”
Spain September services PMI 57.0 vs 54.0 expected
- Latest data released by HCOB – 3 October 2024
- Services PMI 57.0 vs 54.0 expected and 54.6 prior
- Composite PMI 56.3 vs 53.5 prior.
Key findings:
- Uplifts in new business and activity growth signalled.
- Employment levels raised markedly.
- Cost inflation down to three-and-a-half year low.
Comment:
Commenting on the PMI data, Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, said:
“The summer is coming to an end and Spain is coming up with a little surprise, as the latest PMI data shows signs of accelerated growth in September, although we anticipated growth to cool down somewhat in the second half of the year. This once again sets Spain apart from the other major eurozone countries. Business activity and new business rose amid reports of a further uplift in market demand.
One could argue that private consumption remains the main growth driver for the economy, as retail trade also expanded in recent months. Nevertheless, one should remain cautious with the current interpretation of the PMI for September. To identify a clearer trend, attention should already be directed toward October, which will provide more indications of the growth trajectory toward the end of the year.
Great news for Spanish employees. With the progressing upturn in sales and demand, firms are accelerating their staffing levels in order to handle their outstanding business, which further extended in September. The corresponding employment index rose to the highest level in 17 months. Against this backdrop, future confidence rose to the highest level in three months, as panellists expressed a desire to launch new projects and expand their range of services.
Little change on the price front. With still increasing wages, input prices again rose noticeably, and associated prices charged also increased but at a softened pace. As mentioned in the last month, price pressures seem to be easing. The latest inflation data for September registered at 1.5%, falling below the ECB’s target rate of 2% and signaling a further softening of inflationary pressures.”
UK September final services PMI 52.4 vs 52.8 prelim
- Final data released by S&P Global – 3 October 2024
- Final Services PMI 52.4 vs. 52.8 expected and 53.7 prior.
- Final Composite PMI 52.6 vs. 52.9 expected and 53.8 prior.
Key findings:
- Business activity growth eases to three-month low in September.
- Robust order books underpin positive business expectations for the year ahead.
- Prices charged inflation slows for third month in a row.
Comment:
Tim Moore, Economics Director at S&P Global Market Intelligence, said:
“The September PMI surveys suggest that the UK economy is still on a positive trajectory, with improving order books accompanied by cooling inflationary pressures. Most encouragingly, prices charged inflation in the service sector, which acts as a barometer of domestic inflationary pressures, edged down to its lowest since February 2021.
UK service providers indicated a moderate expansion of activity in September, fuelled by resilient business and consumer spending. However, the post-election rebound lost some momentum as output, new work and employment all increased at the slowest pace for three months.
Robust domestic demand has been recorded throughout the third quarter of 2024, helping to offset a headwind from lacklustre export sales. Survey respondents linked rising volumes of total new work to renewed growth in the UK economy and the impact of domestic political stability on investment spending.
Some service sector firms commented on delayed decision-making among clients due to business uncertainty ahead of the Autumn Budget on 30th October. However, the majority of survey respondents (56%) expect a rise in business activity during the year ahead, while only 11% forecast a downturn.
The resulting index signaled a slight improvement in overall business optimism since August. Lower borrowing costs, easing price pressures and more certainty regarding the monetary policy outlook all helped to boost growth expectations in the service sector.”
Swiss CPI data: Surprise drop in September
- Swiss PMI reports show declines in CPI for September
Switzerland CPI (MoM) (Sep)
- Actual: -0.3%
- Expected: -0.1%
- Previous: 0.0%
(YoY)
- Actual: 0.8%
- Expected: 1.1%
- Previous: 1.1%
Italy plans windfall tax on companies to narrow deficit
- Italy to ask firms including defense companies to contribute to budget
- Italy to ask companies, including defense companies to contribute to budget
- Says will require sacrifice from all
Goldman Sachs now sees the SNB delivering more easing
- Goldman Sachs predicts a 25bps rate cut by March 2025 for SNB due to low inflation, geopolitical tensions, and strong CHF. Possible 50bps move in December with risks tilted towards more easing.
Goldman Sachs now sees the SNB delivering more easing following today’s lower than expected inflation data.
- GS writes given the SNB’s dovish guidance at its September meeting, benign inflation developments, a rise in geopolitical tensions adding further upward pressure to the currency, and Chairman Schlegel’s recent comments emphasizing the SNB’s commitment to keep CHF appreciation at bay
- GS now expects a further cut of 25bps at the March 2025 meeting, to a terminal rate of 0.5%
- GS sees risks skewed towards more easing in the event of further downside surprises to inflation and CHF strength, and assigns a 40% probability to a 50bps move in December.
September 2024 BoE Decision Maker Panel Data: Inflation and Wage Growth Insights
- Explore the latest insights from the BoE Decision Maker Panel data for September 2024, revealing a decline in year-ahead CPI inflation expectations and unchanged wage growth projections.
BoE Monthly Decision Maker Panel data – September 2024
- Expectations for CPI inflation a year ahead declined by 0.1 percentage point to 2.6% in the three months to September.
- The corresponding measure for three-year ahead CPI inflation expectations was also 2.6% in the three months to September, and 0.1 percentage points lower than in the three months to August.
- Expected year-ahead wage growth remained unchanged at 4.1% on a three-month moving-average basis in September.
Bank of England Governor talks “bit more aggressive” interest rate cuts
- BOE Governor discusses potential interest rate cuts in exclusive interview; dismisses Truss’s ‘deep state’ accusations. GBP reactions on publication.
In an exclusive interview with the Guardian – Bailey held out the prospect of the Bank becoming a “bit more aggressive” in cutting interest rates provided the news on inflation continued to be good.
He also hit back at claims by the former prime minister Liz Truss that the Bank of England was part of a “deep state” that had set out to thwart her plans. Truss’s problems were of her own making, the governor said.
Barclays are expecting the European Central Bank to cut more than expected
- Also looking for continuing rate cut cycle globally
Snippets from Barclays, in summary:
- Shorter term we worry the ECB will need to cut more than expected to stabilise the economy
- seeing only slow growth in the European Union
And, not just the ECB that’ll keep cutting, Barclays is bullish US equities despite stocks being near record highs:
- path of least resistance remains to trade higher
- global rate cutting cycle and China stimulus is keeping a soft landing for the economy on track
Asia-Pacific-World News
Long positions pile on Chinese yuan, Asian FX bulls maintain momentum
- Bullish bets on the Chinese yuan strengthen as investors flock to Asia’s largest economy, while emerging Asian currencies maintain steady long positions. Analysts remain positive on the yuan’s outlook, anticipating a decline in USD/RMB and USD/Asia in the medium term.
Long positions pile on Chinese yuan, Asian FX bulls maintain momentum: Reuters poll
Bullish bets on the Chinese yuan strengthened after quite a bit of stimulus (to put it mildly) measures led to global investors reallocating funds to Asia’s largest economy, while long positions in most other emerging Asian currencies were largely steady, a Reuters poll showed on Thursday.
Long positions on the Chinese currency hit their highest since late January 2023, with analysts maintaining their bullish streak on the yuan for a fifth consecutive iteration of the fortnightly poll.
“The stimulus measures came in as a surprise and were larger than expected, given the base was already low. There is a positive bias in the Chinese yuan, so the USD/RMB could head lower over the coming months, and USD/Asia could fall in the medium term,” Parisha Saimbi, an EM Asia FX strategist with BNP Paribas said.
Nomura urge a ‘more sober assessment’ on China stimulus rally
- Hong Kong stocks are pulling back a little today
Hong Kong’s Hang Seng index is down 3% on the session so far, pulling back after its blistering rally in the wake of stimulus announcement s from China last week.
Nomura is sounding a note of caution in a note today:
- “What has happened in the past week has already reminded us about the epic bubble and burst in 2015,”
- China’s current economic fundamentals are still weak
- “A more sober assessment is required”
Russian services sector growth dips in September, PMI report shows
- Discover how Russia’s services sector slowed in September, with demand and hiring easing.
Business activity in Russia’s services sector grew at a slower pace in September amid a weaker rise in demand, a business survey showed on Thursday, with firms also moderating their hiring efforts.
The S&P Global Purchasing Managers’ Index for Russian services fell to 50.5 in September from 52.3 in August, indicating only a fractional rise in output. Any reading above 50 signals growth, while below 50 indicates contraction.
The pace of job creation eased to its weakest since February, the survey showed, and new orders increased for the third consecutive month but at a slower pace than in August.
“Anecdotal evidence noted that despite demand increasing on average, there were instances of a slowdown in client activity,”
Turkish CPI Inflation Drops to 49.4% in September
- Turkish CPI inflation falls to 49.4% y/y, with prices rising by 3% m/m; Education and housing costs surge.
Turkish CPI inflation declines to 49.4% y/y in September
- Prices rise by 3% m/m, showing underlying pressures
- Education costs surge due to a spike in tertiary fees
- Housing costs climb, driven by 7.6% increase in rents
- ading base effects challenge CBT reaching the inflation target
Australian (final) services PMI for September 50.5 (prior 52.5)
- Judo Bank / S&P Global PMIs for September 2024
- composite 49.6
In brief from the report:
- Final September PMI confirms sluggish economic growth, similar to Flash release.
- Services sector continues expanding, increasing staffing, but at a slower pace than early 2024.
- Business cost pressures remain, harder to pass on to consumers.
- Service sector activity remains above neutral but has slowed, with new business index averaging 51.4 in the last three months.
- Limited economic boost from tax cuts and stimulus; RBA likely to maintain cash rate.
- Employment growth in services sector slowing; public sector demand helps offset private sector decline.
- Output price pressures falling, but input costs still high, limiting profitability.
- Business outlook depends on household spending rebound in FY25.
RBNZ preview – most likely cut the cash rate by 50bps next week, and again in November
- RBNZ meet October 9 and then again on November 6
Analysts at KiwiBank title their note:
The RBNZ will most likely cut 50bps next week, and again in November. It’s the easiest thing to do.
KiwiBank have been well ahead of the curve on projecting 50bpo rate cuts in October and November from the Reserve Bank of New Zealand.
From their latest:
- now that a 50bp cut is consensus amongst economists and market traders, it’s actually harder NOT to deliver a 50bp cut
- A 50bp cut next week, with a signal of another in November, would only appease traders and keep wholesale rates where they are. If the RBNZ is serious about reducing the restrictiveness (not providing stimulus) of monetary policy, the market has opened them up for larger moves. Overly restrictive monetary policy has inflicted much pain and tamed the inflation beast. Households and businesses are struggling. It’s been two years of recession. Interest rate relief is required, now. And long policy lags must be taken into account.
New Zealand September commodity price index +1.8% m/m (prior +2.1%)
- The September ANZ Commodity Price Index for New Zealand:
- +1.8% m/m in September
In New Zealand dollar terms, the index fell 0.2% m/m as the NZD Trade Weighted Index lifted 1.0%.
As part of this report ANZ remark on Global shipping prices:
- continue to bounce around as shipping route disruptions persist.
- Escalated tensions in the Middle East have resulted in the majority of container ships opting for the longer route around Cape Horn rather than risking the more direct passage through the Suez Canal.
- The Baltic Dry Index lifted 12% during September, but other shipping indices softened during the month. This includes the China Containerized Index, which has eased as we are now past the seasonal peak in exports from China.
- Dock workers in the United States are currently striking, which is expected to cause considerable delays at many ports.
Japan Jibun Bank September Services PMI (final): 53.1 (prior was 53.7)
- Japan S&P Global / Jibun Bank final services and composite PMIs for September 2024
Services 53.1 (prior was 53.7)
- Composite 52.0 (prior 52.9)
The key points from the report:
- Business activity and new order growth sustained
- Outstanding business rises for second time in three months
- Confidence remains strong but eases to 20-month low
In summary from the commentary to the report:
- The Japanese service sector maintained strong performance at the end of Q3 2024, with only a slight slowdown in activity and new business growth, averaging 53.5, similar to Q1 (53.4), indicating steady growth.
- Companies remained optimistic, with rising outstanding business leading to workforce expansion.
- The service sector continued to support overall private sector growth, despite a slight dip in manufacturing output.
- However, aggregate new business growth slowed in September, and backlogs of work declined for the fifth consecutive month, influenced by the manufacturing sector’s weakness.
- The sector’s response to risks like a stagnating economy will be crucial for the broader private sector’s performance.
BOJ’s Noguchi says must patiently maintain loose monetary conditions
- More Bank of Japan dovishness
- BOJ board member Noguchi said they must patiently maintain loose monetary conditions.
- BOJ’s Noguchi stated it will take considerable time for the public to shift to a mindset where inflation can sustainably reach 2%.
- Noguchi personally believes that the uptrend in consumption is likely to become clearer.
- Cost pressure from wage hikes is gradually being reflected in service price rises, according to Noguchi.
- BOJ will likely gradually adjust the degree of monetary support while cautiously examining whether inflation stably reaches 2%, accompanied by wage gains.
- Noguchi mentioned that BOJ’s policy adjustment is aimed at smoothing the path toward achieving potential growth that helps inflation durably reach 2%.
- BOJ’s tapering of bond buying is aimed at recovering flexibility in markets without causing turbulence.
- BOJ can take its time and move cautiously in reducing its balance sheet, Noguchi added.
Japan PM Ishiba didn’t request any special policy from BOJ Gov Ueda at Wednesday meeting
- Japan chief cabinet secretary Hayashi reporting on the Ishiba / Ueda conversation
- PM Ishiba didn’t request BOJ governor Ueda any specific of monetary policy when they met on Wednesday
Japan’s Finance Minister Kato’s comments on the BoJ / JPY
- Japan’s Finance Minister Kato’s comments prompt BoJ response, emphasizing stability in currency movements and following BoJ guidance.
Japan’s Finance Minister Kato has been on the wires..
- Specifics Of Monetary Policy Should Be Left To BoJ
- Ishiba’s Comments Are Based On BoJ’s Explanation
- Important That FX Moves In Stable Manner, Reflecting Fundamentals
- Watching Currency Moves With Sense Of Urgency
- Will Communicate Thoroughly With Markets
Cryptocurrency News
Bitcoin creator Satoshi Nakamoto has been identified – will be revealed in a TV show
- Reveal is next week, and in the lead up around $15mn has been drained from a number of high-value wallets from the “Satoshi era”, activated for the first time since 2009.
A TV documentary maker has said he has found Satoshi Nakamoto’s identity, which is the fake name used by the creator of Bitcoin.
The name will be revealed in a new HBO documentary, set to air Wednesday October 9 at 9 p.m. US Eastern time.
Politico with the heads up, adding:
- Intriguingly, as the date for the airing of the documentary has drawn near, a number of high-value wallets from the “Satoshi era” have become active for the first time since 2009. According to Bitcoin Magazine, around 250 bitcoins — worth approximately $15 million at Thursday’s bitcoin rate of $60,754 to the dollar — were drained from wallets in the past two weeks. While the coins are not officially linked to wallets used by Satoshi Nakamoto, they have been dormant since the earliest days of Bitcoin, when the cryptocurrency was worth almost nothing. The wallets’ creators would certainly have been Satoshi’s earliest collaborators.
Ethereum Faces Volatility Ahead of US Election
Ethereum investors are bracing for heightened volatility as the US presidential election approaches, driven by concerns over DeFi’s regulatory uncertainties. Despite the downturn in the price, Ethereum could recover and reclaim the $2,395 level if it bounces off a key trendline.
Key Factors Impacting Ethereum
- Election-Driven Volatility: Regulatory uncertainties, particularly in the decentralized finance (DeFi) ecosystem, are expected to play a significant role in Ethereum’s performance. The election could bring major price movements due to possible changes in crypto regulations depending on the election outcome.
- Implied Volatility Increase: Ethereum’s 30-day-to-expiry at-the-money implied volatility (IV) has increased by 7% compared to Bitcoin’s over the past year. A forward volatility spike is expected between October 25 and November 8, with ETH seeing a 76.6% rise in IV.
- Whale Activity: Ethereum whales have been selling portions of their holdings amidst price declines, with a major ICO whale selling 19K ETH worth $47.54 million in the past two days. However, ETH ETFs saw $19.8 million in net inflows on Wednesday despite the price dip, signaling some investors may still see buying opportunities.
Outlook: Investors will likely keep a close eye on election-related developments, with Ethereum’s future performance hinging on how DeFi regulation evolves under a new US administration.
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