North American News
US stocks close near the lows, give up nearly all of yesterday’s gains
- Right back to pre-CPI levels
It was an ugly day for stocks but if you told me before the CPI data that it would be hot and that stocks would trade flat on Thursday-Friday, I’d say that’s constructive. It sure doesn’t feel that way though.
- S&P 500 down 86 points to 3583 or 2.4%
- Nasdaq Comp -3.1%
- Russell 2000 -2.6%
- DJIA -1.3%
UMich September US prelim consumer sentiment 59.8 vs 59.0 expected
- US consumer sentiment and inflation expectations data from the University of Michigan
- Prior was 58.6
- Current conditions 65.3 vs 59.9 expected (prior 59.7)
- Expectations 56.2 vs 58.5 expected (prior was 58.0)
- 1-year inflation 5.1% vs 4.7% prior
- 5-10 year inflation 2.9% vs 2.7% prior
Atlanta Fed GDPNow tracker revised down to 2.8% from 2.9%
- GDP growth estimate for 3Q 2022
In their own words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 2.8 percent on October 14, down from 2.9 percent on October 7. After recent releases from the US Bureau of Labor Statistics and the US Census Bureau, the nowcast of third-quarter real personal consumption expenditures growth decreased from 1.3 percent to 1.2 percent.
US September retail sales 0.0% vs +0.2% expected
- September 2022 US retail sales data
- Prior was +0.3%
- Ex autos +0.1% vs -0.1% expected
- Prior ex autos -0.3% (revised to -0.1%)
- Control group +0.4% vs +0.3% expected
- Prior control group +0.0% (revised to +0.2%)
- Ex autos and gas +0.3% vs +0.3% prior (revised to +0.6%)
- Gasoline stations -1.4% m/m vs -4.2% prior
- Retail sales % y/y unadjusted for inflation +8.2% vs +9.4% prior
Commodities
Gold losses traction, down below $1650 as US bond yields recover
- Gold price extended its weekly losses by 2.8%, below $1650.
- US data reported that retail sales disappointed while consumer sentiment improved.
- XAU/USD Price Forecast: The break below $1660 opened the door for a test of the weekly low at $1642.49.
Gold price extends its losses, while the greenback recovered some ground following Thursday’s US inflation report, which will keep the Fed’s pedal to the metal as traders brace for big rate hikes in November and December FOMC’s meetings. The XAU/USD is trading at $1646 a troy ounce after hitting a daily high of $1671.
XAU/USD tumbles as the US dollar strengthens, underpinned by high US T-bond yields
US equity indices opened in the red, portraying a negative sentiment. US Retail Sales showed consumers are beginning to feel the shock of higher interest rates, with September’s sales decelerating from 0.3% to 0% MoM, below expectations, and slowed by 8.41% annually. Of late, the University of Michigan Consumer Sentiment edged higher to 59.8, exceeding estimates but inflation expectations for one year rose to 5.1%, above forecasts of 4.7%.
Meanwhile, a slew of Fed policymakers are crossing newswires, led by Fed’s George, Daly, and Cook. The Kansas City Fed, Esther Goerge, said that the only piece of clear data is that inflation is high in the US. She echoed previous commentaries of her colleagues, saying that the rates need to get into restrictive territory, though she’s not clear on where rates will peak.
Later the San Francisco Fed Mary Daly said that inflation is not cooling, while today’s retail sales flashed some signs of easing. She reiterated what Fed’s George expressed the need to get policy restrictive and foresees the Federal funds rate (FFR) to peak at around 4.5%-5%.
At the same time, one of the Fed’s new members Lisa Cook, repeated some of its last week’s speech, saying that inflation remains “stubbornly and unacceptably high” and added that she does not want a “stop and go” policy.
Given the backdrop, XAU/USD ignored most Fed officials’ comments, hovering just below $1650. US Treasury bond yields, namely the 10-year, edge up three and a half bps, at 3.987%, capping the recovery of the yellow metal.
Silver reaches key support area at $18.10
- Silver prices accelerate their downtrend to approach the support area at $18.10.
- Precious metals lose ground amid US dollar strength.
- Below $17.60 XAG/USD will be exploring two-year lows.
Silver futures have accelerated their downtrend on Friday, weighed by the overall US dollar recovery. XAG USD has lost more than 4% so far today and is on track to complete a six-day sell-off.
Approaching mid-term lows at the $18.00 area
Precious metals are on the back foot on Friday, with the US dollar appreciating amid hopes that the Federal Reserve will announce the fourth consecutive 75 bp rate hike in November. US CPI figures released on Monday confirmed the resilient inflation pressures paving the path for the Fed to keep ramping up interest rates.
Furthermore, increasing fears of a global recession, on the back of a set of downbeat macroeconomic data is also pushing wary investors towards the safe-haven greenback.
Against this backdrop, silver prices have plummeted from prices beyond $21 in early October to the lower range of $18 on Friday, entering a narrow area between $18.10 and $17.60, which contains July, August, and September’s lows.
With technical indicators highlighting the strong bearish momentum, a successful breach of $17.60 might take the pair to explore June 2020 lows at the $17.00 area and Apr 14, 2020 high at S15.85.
On the upside immediate the pair should breach the 50 and 100-days SMAs, at $19.25 and $19.85 respectively to regain bullish traction and test the $230.00 psychological level.
Oil falls to a fresh low for the week. Levels to watch
- Oil touches $85.33 at the lows
The oil market has been a significant source of volatility this month as the uncertainty around the OPEC decision and economy dominate flows. Seasonally, October is also a weak month for crude with some believing the Mexico hedge is the reason why.
In any case, the price action today has mirrored the broader market with crude struggling. It was last down $3.44 to $85.86 after falling as lowas $85.33.
EU News
BOE accepts all £129.4m of offers at daily index-linked gilt operation
- This was the last round for this auction
- Yesterday’s operation took down £3.1768B
- No offers rejected
The crisis isn’t over: Gilts lead a global bond slump
- The gilt crisis isn’t over
The BOE tried an emergency QE program.
The government tried undoing its corporate tax cut.
Yet here we are, with gilts fast-approaching the levels were the BOE intervened and Truss did a U-turn. UK 30s are now up 22 bps on the day and 52 bps from the lows.
This is a monumental test for UK markets and it’s spilling over globally.
Other News
Fed’s Daly: CPI report wasn’t that surprising, it’s a lagging indicator
- Interview on Yahoo Finance
- CPI report on Thursday was a reminder that we have work to do on inflation
- CPI shows inflation is not cooperating
- Labor market is cooling
- Today’s retail sales report another sign of some cooling
- We will have to be data dependent on rate hikes
- We are working in a global economy, lots of uncertainty and risks
- No doubt that we need more restrictive policy
- We are rightening into a strong economy
- I still think SEP projections are really reasonable
- Too much uncertainty for it to be prudent to write down exact rate hike path
Fed’s Cook: We need ongoing rate hikes
- Comments from the Fed governor
- Inflation is too high, must come down
- We’ll keep at it until the job is done
- Need to see inflation actually falling in data
- Uncertain times require a risk management approach to policy
- Core inflation has been surprisingly strong
Cryptocurrency News
Mastercard to usher in new era: Make everyday payments with cryptocurrencies
- Mastercard believes digital assets like cryptocurrencies and central bank digital currencies have the potential to transform the financial system.
- Mastercard is focused on crypto cards and this is the first area to expand and rollout crypto payment services.
- The American multinational card giant has outlined five areas where cryptocurrencies will become everyday payment methods.
Mastercard, one of the biggest financial institutions in the US, is keen on rolling out crypto payment services to include in users’ everyday lives. The US giant’s steps crypto payments are expected to drive mainstream adoption of digital assets.
Ripple Price Analysis: Only one hurdle stands between XRP and $0.90
- XRP price is currently hovering above the $0.464 support level, but the upside is capped due to the $0.561 to $0.596 hurdle.
- A flip of this resistance area into a support floor could kick-start a 52% run-up to $0.900.
- A daily candlestick close below $0.464 will create a lower low and invalidate the bullish thesis for Ripple.
XRP price continues to remain strong relative to other altcoins despite the recent downturn. Regardless, the crypto markets seem to be shifting their bias to favoring bulls, so investors can expect Ripple to continue its ascent.
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