Round up of today’s market news

North American News

S&P Index Hits New High as Dow Jones Gains Over 200 Points; NASDAQ Leads the Rally

The stock market experienced a notable surge, with the S&P index closing at a new all-time high for the 46th time this year, marking a two-year anniversary of the current bull market. The Dow Jones Industrial Average traded up over 200 points, and the NASDAQ index led the way with a solid gain.

Market Performance:

• Dow Jones Industrial Average rose by 201.36 points (+0.47%) to settle at 43,065.22, reaching an intraday high of 43,139.00.
• S&P 500 Index increased by 44.82 points (+0.77%) to close at 5,895.85, with a new intraday peak of 5,871.41.
• NASDAQ Composite surged by 159.75 points (+0.87%) to end the day at 18,502.69, just 0.77% off its all-time closing high of 18,647.45.
• Russell 2000 gained 14.22 points (+0.64%) to close at 2,248.63.

Market Drivers:

• The rally was supported by strength in mega-cap stocks, which bolstered broader market gains.
• However, Boeing’s (BA) announcement of a Q3 revenue shortfall and subsequent workforce reductions weighed down the Dow, contributing to market volatility.
• Investors were also disappointed by China’s Ministry of Finance, which provided insufficient details regarding economic stimulus efforts, dampening market sentiment.

Earnings Reports Ahead:

• Major companies are set to report earnings, including UnitedHealth (UNH), expected to release results before Tuesday’s open. Other notable earnings reports include Walgreens Boots Alliance (WBA), Johnson & Johnson (JNJ), and Bank of America (BAC), which will be closely watched for market impact.

As the markets continue to react to both corporate earnings and macroeconomic developments, investors remain optimistic about the ongoing bull market trajectory.

Fed’s Waller says that they should proceed with more caution on rate cuts than what was needed at September meeting

• FOMCs Christopher Waller is speaking:

• Fed should proceed with more caution on rate cuts than what was needed at September meeting
• My baseline calls for reducing policy rate gradually over the next year
• Policy rate is currently restrictive.
• If economy proceeds as expected, can move policy to a neutral stance at a deliberate pace.
• If, in a less likely case, inflation falls below 2% or labor market deteriorates, the Fed can front-load rate cuts.
• If inflation unexpectedly rises, the Fed could pause rate cuts.
• Latest inflation data is disappointing.
• Economy is on solid footing, may not be slowing as much as desired; expect GDP to grow faster in 2H 2024.
• Household resources for future consumption are in good shape.
• Consumers are eager to make big-ticket purchases as rates come down, with pent-up demand.
• Labor market is quite healthy, labor supply and demand have come into balance.
• Hurricanes, Boeing strike may reduce October payrolls growth by 100,000.
• Looking ahead, expect payroll gains to moderate, unemployment rate to drift higher but stay historically low.
• Watching inflation data to see how persistent recent uptick is; progress on inflation has been a rollercoaster.
• Right now a lot of recent high productivity growth is just a rebound from lower readings earlier
• Unsustainable fiscal policy is the biggest threat to R-star
• If we continues to see reduction in labor demand, will start seeing more unemployment
• We are in sweet spot now, we have to keep it there.
• “Gradually” on rate cuts is in in the eye of the beholder
• It would be problematic to move policy rate in response to election
• Would be hard to go back to 2019 prices without doing drastic policy tightening
• Volatile data have made this a weird time for policymakers

The Earnings calendar this week includes Citi, BofA, J&J, Goldman, United, TSMC & Netflix

• The earnings calendar heats up this week

The earnings season kickstarted at the end of last week with J.P. Morgan, Wells Fargo leading the way.

More financials will announce this week along with companies like United, Johnson & Johnson, Taiwan Semi Conductor and Netflix also on the release calendar. 

Fed’s Kashkari: Neutral rate is likely higher now than where it was pre-pandemic

• Minneapolis Fed Pres. Kashkari is speaking in Buenos Aires:

• Economy in final stages of getting inflation back to 2%.
• It’s unclear how restrictive monetary policy is.
• The job market remains strong.
• Recent jobs data shows labor market isn’t weakening quickly.
• Further modest rate cuts appear appropriate.
• Future path of monetary policy to be driven by data, economy’s performance.
• Neutral right is likely higher than pre-Covid levels
• If US debt continues to increase then the neutral rate will also increase

Deutsche Bank warns the incoming US data will be ‘complicated’

• Comes after huge jobs report and CPI

Deutsche Bank say that recent storms and port strikes are going to make incoming economic data reports more difficult to interpret.

• “We are in for a period of data heavily influenced by recent storms and strikes.”
• “So this will likely make it a complicated few weeks for markets and the Fed.”

DB note that the CPI data last week, and the huge jobs report the week before, changed the expectations of what’s to come from the Federal Open Market Committee (FOMC):

• “The view I’ve felt most certain of was that the market was massively overpricing the perfect scenario of smooth enough data that the Fed would be able to serenely cut rates back below 3% without a recession”
• “If we don’t get a recession, it’s hard to see how rates can be cut anywhere near as aggressively as this.”

Commodities

Gold Retreats as China’s Stimulus Efforts Fall Short Amid Strengthening US Dollar

Gold prices have retraced after peaking at $2,666 on Monday, now trading around $2,650, as China’s stimulus measures failed to alleviate deflationary pressures within its economy. The robust performance of the US dollar, bolstered by comments from Minneapolis Fed President Neel Kashkari regarding modest rate cuts and a resilient labor market, has further weighed on bullion prices.

Market Overview:

• China’s economic indicators have raised concerns about deflation, threatening its goal of a 5% GDP growth. In response, Finance Minister Lan Foan announced ongoing stimulus measures, focusing on supporting the property market and enhancing state bank capital.
• The US bond market is closed for Columbus Day, yet gold continues to decline as the dollar strengthens.

US Dollar Strength:

• The US Dollar Index (DXY), which gauges the dollar’s value against a basket of six major currencies, increased by 0.38% to 103.30, marking its highest level since early August 2024.
• Neel Kashkari noted expectations for “further modest reductions in our policy rate,” citing strong jobs data and progress towards achieving a 2% inflation target.

Geopolitical Influences:

• Geopolitical tensions, particularly regarding Israel’s military response to Hezbollah and Iranian actions, are also affecting gold prices, with traders keeping a close watch on developments.

Upcoming Economic Data:

• The US economic calendar features the New York Empire State Manufacturing Index on Tuesday, anticipated to drop from 11.3 to 2.3.
• Fed officials, including San Francisco Fed President Mary Daly and Board Governor Adriana Kugler, are set to deliver public remarks this week, potentially impacting market sentiment.
• Investors are also eyeing the combination of a slightly elevated Consumer Price Index (CPI) and a weak US employment report, which may prompt additional rate cuts from the Fed.

Market Sentiment:

• Data from the Chicago Board of Trade suggests that investors are currently pricing in 46 basis points of easing by the Fed toward the end of 2024. Gold traders remain alert to key US economic data releases that could influence price movements in the near term.

Crude oil settles at $73.83

• Down -$1.73 or -2.29%

Crude oil futures are settling at $73.83. That is down $-1.73 or -2.29%. The high price today reached $74.83. The low price was at $73.43. That comes after closing on Friday at $75.44.

The declines today come despite increased tensions in the Middle East as Israel continues its Iran retaliation plan. Concerns about China growth is bearish for crude.

OPEC cuts global oil demand growth forecast for third month in a row

• The bloc downgrades their demand forecast for both 2024 and 2025

• 2024 global oil demand growth forecast to 1.93 mil bpd (previously 2.03 mil bpd)
• 2025 global oil demand growth forecast to 1.64 mil bpd (previously 1.74 mil bpd)

The main reason for the lower revision was China, with OPEC now anticipating demand growth there of 580k bpd – down from 650k bpd in the previous report.

EU News

European equities closed higher

• Spain’s Ibex and Italy’s FTSE MIB up over 1% today

The major European indices are closing higher led by Spain’s Ibex and Italy’s FTSE MIB which rose by over 1%.

The closing levels shows:

• German DAX, +0.64%
• France’s CAC +0.32%
• UK’s FTSE 100 +0.47%
• Spain’s Ibex +1.12%
• Italy’s FTSE MIB +1.09%

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

• Latest data released by the Federal Statistics Office – 14 October 2024

Looking at the breakdown, producer prices were flat on the month while the drag was mostly from import prices – down 0.4%.

SNB total sight deposits W.E. 11 October CHF 467.1 bn vs CHF 471.4 bn prior

• Latest data released by the SNB – 14 October 2024

• Domestic sight deposits CHF 459.4 bn vs CHF 460.3 bn prior

Total sight deposits fell back in the past week, just slightly off after the jump in late September and early October – which might’ve suggested that the SNB was at work. Here’s a look at the trend in the past few months:

Current indicators point to continued weakness in German economy in Q3 – ministry

• The German economy ministry remarks in its monthly report

Given what we have seen from the PMI data and what not, it’s hardly a surprise. As Europe’s largest economy, Germany has been struggling hard and that has led to brewing worries at the ECB. In particular, the manufacturing sector continues to suffer from a recession with no brighter prospects on the horizon yet.

Asia-Pacific-World News

China Announces CNY 6T treasury bond plan to support local debt & property market stability

• China announces a CNY 6 trillion Treasury Bond plan over three years to aid local debt management and stabilize the property market, with a focus on special bonds by 2024.

• China plans to issue CNY 6 trillion in Treasury Bonds over three years, with a portion of the funds helping local governments manage off-the-books debts.

China’s Vice Finance Minister emphasized promoting stability in the property market and expanding the scope of local government debt usage, aiming to issue CNY 1 trillion in special treasury bonds by 2024.

China September M2 money supply +6.8% vs +6.4% y/y expected

• Latest Chinese credit data for September 2024 has been released

• Prior +6.3%
• New yuan loans ¥1.59 trillion
• Prior ¥900 billion

China total imports and exports exceed ¥32 trillion in the first three quarters

• It is the first time that the Q3 year-to-date figure surpasses the ¥32 trillion mark

In total, China’s imports and exports reached ¥32.33 trillion year-to-date as of September. Looking at the numbers:

• Q3 year-to-date yuan-denominated exports +6.2% y/y
• Q3 year-to-date yuan-denominated imports +4.1% y/y

China records ¥582.62 billion trade surplus in September

• More details on China’s trade performance for September as released by the customs

• Yuan-denominated exports +1.6% y/y
• Yuan-denominated imports -0.5% y/y
• Dollar-denominated exports +2.4% y/y
• Dollar-denominated imports +0.3% y/y

Goldman Sachs has boosted its China GDP forecast to just below the government target

• GS project 4.9% in 2024

Goldman Sachs are forecasting 4.9% economic growth (GDP) in China for 2024. From 4.7% previously.

The government target is ‘around 5%’.

GS have also marked higher their 2025 forecast. also.

• 4.7% (from 4.3%)

GS are citing stimulus announced by Chinese authorities.

• “clearly indicates that policymakers have made a turn on cyclical policy management and increased their focus on the economy”

PBOC sets USD/ CNY reference rate for today at 7.0723 (vs. estimate at 7.0722)

• PBOC CNY reference rate setting for the trading session ahead.

In open market operations (OMOs):

• PBOC injects 20bn yuan via 7-day RR, sets rate at 1.5%
• zero mature today

China ‘stimulus’ briefing: support for business and consumers, financing costs lowered

• This news conference is being conducted by China’s Infrastructure Ministry, Ministry of Industry and Information Technology, and State Administration for Market Regulation

China’s Infrastructure Ministry, Ministry of Industry and Information Technology, and State Administration for Market Regulation briefing.

Some supportive measures being offered up for equipment upgrades, consumer trade-ins. The financial regulator says it’ll lower financing costs for small and mid-sized businesses.

China September CPI data came in below expectations as PPI slumped further

• China inflation data – deep PPI deflation and slowing CPI inflation

China CPI (MoM) (Sep)

• Actual: 0.0%
• Expected: 0.4%
• Previous: 0.4%

China PPI (YoY) (Sep)

• Actual: -2.8%
• Expected: -2.6%
• Previous: -1.8%

China CPI (YoY) (Sep)

• Actual: 0.4%
• Expected: 0.7%
• Previous: 0.6%

China PPI (YoY) (Oct)

• Actual: -2.8%
• Expected: -2.6%
• Previous: -1.8%

Four of China’s biggest state-owned banks confirm mortgage rate cuts, beginning October 25

• Rates will be cut to as low as 30bp beneath the current loan prime rate

Four of the biggest state-owned banks in China confirmed over the weekend that cuts to existing mortgage rates will start on October 25.

The People’s Bank of China said cut by no less than 30 basis points (bps) below the Loan Prime Rate. The current 5-year LPR, used as a reference for long-term credit including mortgages, is 3.85%. Thus mortgage rates will fall to 3.55%.

ICYMI: China to crack down on illegal & irregular activities in the futures market

• China Securities Regulatory Commission (CSRC)

Late Friday from the China Securities Regulatory Commission (CSRC):

• CSRC to urge banks to enhance credit management and prevent enterprises from illegally using loans for commodity futures speculation.
• China will take strict action to crack down on illegal and irregular activities in the futures market.
• Give play to the dual functions of stock index futures and options to stabilize the market and activate the market, and enrich the trading varieties.
• Effective measures will be implemented to curb excessive speculation.
• CSRC is studying the inclusion of stock index futures and treasury bond futures in the opening up of specific varieties to overseas investors.

Chinese equites saw the biggest inflow on record

• Info via Barclays

ICYMI from late last week – Snippet from Barclays on emerging markets:

Record inflows for EMs (for the week to Wednesday), US$41bn total, mainly into China:

• record inflows into Chinese equities: $39 billion of inflows
• $30 billion inflow from domestic investors
• $9 billion inflow from foreign investors

CBA maintains base case December RBA 25bp rate cut – see firmer disinflationary pulse

• Commonwealth Bank of Australia expect the Reserve Bank of Australia to cut is cash rate on December 10

A detailed note from Commonwealth Bank of Australia on what they expect from the RBA.

In summary:

• Our base case sees the RBA commence normalising the cash rate by the end of 2024 (we have pencilled in December for the first 25bp interest rate cut)
• A firmer disinflationary pulse than the RBA anticipates is a necessary condition for the Board to ease policy this calendar year.
• The already released September quarter consumer prices data in a raft of surveys gives us greater confidence that the much desired disinflationary process has recently gathered momentum.
• But it will be up to the Q3 24 CPI, due to be released on 30 October, to confirm that our assessment of the current pace of inflation is the correct one.
• The RBA Board will be more willing to commence normalising the cash rate if inflation proves less persistent than previously assumed.

CBA take a detailed look at 7 inflation indicators. Like I said, its detailed, but in very, very brief:

• Melbourne Institute Inflation Gauge has dropped sharply
• NAB final prices measure eased further in September
• Output prices in the S&P/Judo PMI back to their pre – pandemic run rate in September
• Advertised rental growth has dropped sharply
• ABS monthly CPI indicator posted a welcome drop in August
• CBA internal wages model has turned down
• Consumer inflation expectations are also trending lower

New Zealand services PMI for September 2024: 45.7 (prior 45.5)

• BNZ – BusinessNZ Performance of Services Index

BNZ – BusinessNZ Performance of Services Index for September 2024 remains in contraction at 45.7

• August was 45.5
• seven consecutive months in contraction

BNZ’s Senior Economist Doug Steel:

“movements in the PSI sub-indices were mixed in September, but all of them have been below 50 for seven consecutive months. While falling interest rates will be supportive in time, the sector continues to face significant headwinds at present”.

New Zealand retail sales slumped further in September

• More poor data from NZ

New Zealand Electronic Card Retail Sales (YoY) (Sep)

• Actual: -5.6%
• Previous: -2.9%

New Zealand Electronic Card Retail Sales (MoM) (Sep)

• Actual: 0.0%
• Previous: 0.2%

New Zealand Performance of Services Index

• Actual: 45.7
• Previous: 45.7

Japanese Prime Minister Ishiba says will not intervene in BOJ monetary policy

• Ishiba spoke on Saturday

Ishiba kicked off his term as PM by saying Japan’s economy was not ready for further Bank of Japan rate hikes.

He has back peddled, and did so again over the weekend:

• “It’s important to avoid vocally intervening” in monetary policy affairs
• Or even appear as if he was doing so
• “the Bank of Japan makes an individual decision on policy”
• “I believe the BOJ’s governor and staff have a strong sense of responsibility over achieving price stability”

Ishiba threw in a few comments on the economy though:

• consumption needs lifting to help achieve a sustained departure from deflation
• real wages need to boosted

Singapore’s central bank leaves monetary policy unchanged

• Monetary Authority of Singapore

Monetary Authority of Singapore policy statement, leaves policy on hold, as expected:

• will maintain the prevailing rate of appreciation of the S$NEER policy band
• There will be no change to its width and the level at which it is centered
• core inflation should average between 2.5%-3.0% for 2024 as a whole
• core inflation should end the year around 2%
• core inflation momentum is expected to remain contained in Q4
• Singapore economy should continue to expand at a steady pace and keep close to its potential path in 2025
• next year, the Singapore economy is currently forecast to expand at close to its potential rate
• core inflation is expected to average around the mid-point of the forecast range of 1.5-2.5% in 2025
• for the year as a whole, MAS expects GDP growth to come in around the upper end of the 2-3% forecast range
• based on this outlook, MAS assesses that the monetary policy settings are for now still consistent with medium-term price stability.
• CPI-all items inflation is forecast to average 1.5-2.5% as well in 2025
• core inflation has stepped down but is anticipated to decline further to around 2% by the end of 2024
• the risks to Singapore’s inflation outlook are more balanced compared to three months ago

Cryptocurrency News

Bitcoin Approaches September High, Trading at $66,508

Bitcoin has seen significant upward momentum today, reaching a high of $66,264, breaking through key resistance levels and trading closer to the September high of $66,508.

Market Highlights:

• Bitcoin has surpassed critical swing highs from late August around $65,000 and another swing area near $65,468, establishing these as close support levels.
• Maintaining above $64,988 keeps bullish sentiment strong among buyers.
• A breakout above $66,508 could propel Bitcoin to its highest price since July 31, when it peaked at $70,016. The year’s high remains at $73,794, reached on March 14.

Technical Indicators:

• Over the weekend, Bitcoin’s price held above its 200-day moving average, currently at $62,187, and has also regained its position above the 100-day moving average at $62,687.

Drivers Behind the Rally:

• Liquidation of Short Positions: The market witnessed over $93 million in Bitcoin liquidations, with $83 million attributed to short positions. This surge indicates increasing bullish sentiment and has contributed to the recent price rebound.
• U.S. Inflation Data: Positive inflation reports from the U.S., highlighted by a 0% Producer Price Index (PPI) reading, have eased inflation concerns, making riskier assets like Bitcoin more appealing to investors.
• Optimism Ahead of U.S. Elections: Renewed optimism surrounding the upcoming U.S. presidential election has further bolstered market sentiment. Former President Trump, a known advocate for Bitcoin, has shown improved polling numbers, adding to the positive outlook for the cryptocurrency.

As Bitcoin continues its ascent, investors will be watching closely for potential breakout opportunities and any shifts in market dynamics.

Crypto Today: Bitcoin, Ethereum Surge While XRP Holds Steady Amid Institutional Demand Slowdown

Bitcoin has made significant gains, approaching the $65,000 mark on Monday with nearly a 4% increase. Ethereum followed suit, climbing over 3% to trade above $2,500, while XRP edged up above $0.53 but remains within its recent trading range.

Bitcoin, Ethereum, and XRP Updates:

• Bitcoin (BTC): Spot ETFs recorded only two days of positive flows out of five last week, reflecting a slowdown in institutional demand. Despite this, Bitcoin continues to hover near $65,000.
• Ethereum (ETH): Ethereum surpassed $2,500 on Monday, even as Spot Ether ETFs struggled to attract institutional interest. There were three days of positive flows last week, signaling a potential turnaround after a period of inactivity, according to Farside Investors.
• XRP: Trading above $0.5300, XRP maintains its recent gains as traders await news regarding the ongoing SEC lawsuit.

Market Updates:

• According to a September 2024 stablecoin report from CCData, the total market capitalization of stable assets increased by 1.50% in September, reaching $172 billion. This marks the twelfth consecutive month of growth for stablecoins.
• World Liberty Financial, a DeFi project backed by Donald Trump, confirmed a token sale scheduled for Tuesday, October 15. Meanwhile, a PEPE coin holder fell victim to a phishing attack, losing $1.39 million worth of the meme coin due to a Signature phishing scheme.

Industry Updates:

• A local Korean news outlet reported that the Korean Virtual Asset Committee will convene to discuss the potential approval of virtual asset spot ETFs and corporate virtual asset investments, possibly as early as October.
• Lookonchain data indicates that a wallet linked to Longling Capital, associated with China’s Meitu company founder, acquired 5,000 Ether on Sunday.
• Bitcoin staking platform Solv Protocol successfully raised $11 million at a valuation of $200 million from notable investors, including a Nomura subsidiary, Blockchain Capital, and OKX Ventures. As of Monday, over 20,000 BTC are staked on the platform, effectively removing these tokens from circulation.

The cryptocurrency market continues to show resilience and adaptability, despite fluctuations in institutional demand for Bitcoin and Ethereum ETFs.

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