North American News
Two day win streak for the major US indices
- Dow industrial average the biggest gainer for the 2nd consecutive day
The major US stock indices are closing higher for the 2nd consecutive day. The Dow industrial average is leading the way to the upside.
The final numbers are showing:
- Dow industrial average up 418.03 points or 1.34% at 31500.60
- S&P index up 44.91 points or 1.20% at 3797.67
- NASDAQ index up 92.91 points or 0.86% at 10952.62
- Russell 2000 up 6.152 points or 0.35% at 1748.39
In addition to the big releases on Tuesday, the following big cap companies will release earnings on Thursday including:
- Boeing
- General Dynamics
- Meta
- Ford and
- ServiceNow
On Thursday, the following will release:
- Shopify
- McDonalds
- Caterpillar
- Apple
- Amizaon
- Intel
Looking at the US debt market, yields are higher:
- 2 year 4.498%, +0.7 basis points
- 10 year 4.2383,, +2.6 basis points
- 30 year yield 4.3%, +7.6 basis points
The bond market is sending some troubling signals
- Long-dated bonds continue to blow out
The conspiratorial-minded traders on Friday noted what seemed to be a coordinated communication strategy from the Fed to tamper down on rate hike expectations. The response was a bid in stocks and bonds. The thinking among that crowd was that something bad was happening in the bond market — similar to what happened in the UK — and that the Fed was trying to halt selling.
If that’s the case, it only worked for one day as long bond yields rise 12 bps today to a new cycle high at 4.41%.
Other thoughts on what could be going on:
- Sovereign selling in order to raise money to for currency intervention in Japan and elsewhere
- The implosion in Hong Kong assets has people worried about contagion
- Xi’s consolidation of power will mean inevitable war in Taiwan and China wants to unload Treasuries before it gets sanctioned like Russia
Commodities
Gold bulls seeking a move to key daily resistance
- Gold bulls could be on the verge of a move higher to test daily resistance.
- The US dollar, however, is also at a critical level of support.
Gold is under pressure on Monday as it pulls back from the highs reached at the start of the day around $1,670, 0.5% higher than the current spot price of $1,650. The US dollar has firmed for its safe haven qualities but is teetering with key trendline support that is illustrated below, a break of which could help to boost the yellow metal.
The US dollar index, DXY, was last seen up 0.10 points to 111.98, making gold more expensive for international buyers. The yield on the US 10-year note was last seen down 0.3 basis points to 4.234%, near the 14-year high of 4.325% reached at the end of last week which is pushing up the carrying cost of owning gold.
”We’ve seen this movie before,” analysts at TD Securities said. ”The ‘peak central bank hawkishness’ narrative once again orchestrated an attempted squeeze on bloated money manager shorts in precious metals, but failed to gather steam.”
”’After all,” the analyst say, ”while rates markets are increasingly pricing in a fair outlook for the Fed funds rate, precious metals have yet to discount the implications of a prolonged period of restrictive rates. In reality, the resiliency in gold prices while facing the most hawkish central bank regime since the 1980s highlights a growing battle between retail and institutional flows.”
”Massive purchases of physical precious metals from retail buyers have clashed with institutional investor outflows in past months.”
US data softer, bad news is good news?
Meanwhile, the preliminary October US PMI data were disappointing today, with the numbers indicating that both the manufacturing (49.9 vs 52.0) and service sectors (46.6 vs 49.3) are now in a contractionary territory (50 being par). This leaves prospects of a less hawkish Fed back o the table, so bad news is good news for the gold price. In full, the data showed that 47.3, the composite PMI registered its fourth consecutive print below 50.0. The drop in the composite measure was led by a 4.1% drop in the backlog of orders to 46.6, a 2.2% drop in new orders to 49.0 and a 2.5% drop in employment to 49.8. Output prices fell 0.8 to 58.3. This leaves a dark cloud over US exports and signals that the strength of the US dollar could be impacting negatively.
The next big piece of the puzzle for the US economy will come in the form of Gross Domestic Product. ”We look for US output to have rebounded firmly after registering two consecutive quarterly declines in 22H1. We expect Q3 GDP growth to be supported, in particular, by a large, positive swing in net exports. Domestic demand, however, likely advanced at a below-trend pace,” analysts at TD Securities said.
Silver struggles at the 100-DMA and trips down toward $19.20
- Despite a risk-on impulse, silver price edges lower amidst US Dollar strength.
- US S&P Global PMIs flash contraction as traders eye GDP and PCE figures ahead of the Fed’s next monetary policy meeting.
- Silver Price Forecast (XAG/USD): To extend its losses once it clears $19.20.
Silver price collides with solid resistance at the 100-day Exponential Moving Average (EMA) at $19.64, and retraces below $19.30, as the US Dollar (USD) got boosted by risk-aversion in the FX markets, while US bond yields ease from last week’s highs. Factors like weaker US economic data, alongside US Dollar strength, weighed on the white metal. At the time of writing, XAG/USD is trading at $19.20 a troy ounce, below its opening price.
Business activity in the US declined, bolstered the greenback
S&P Global reported that United States (US) business activity deteriorated sharply in October. The Manufacturing and Services Indices remained in contractionary territory, each at 49.9 and 46.6, consequently impacting the compound figure. The S&P Composite PMI dropped to 47.3, less than estimates, and trailed September’s 49.5, which at contractionary territory, was contained.
Following the report, the greenback aimed lower, as delineated by the US Dollar Index (DXY). However, the DXY recovered some ground and edged towards 112.022. In the meantime, the US 10-year Treasury bond yield is almost flat at 4.219%, a headwind for the silver price.
The blackout period for Fed officials started last Saturday. Friday’s comments by San Francisco Fed President Mary Daly and St. Louis James Bullard said that 75 bps for November are “almost” a done deal but acknowledged that the pace might slow down as rates move higher.
Aside from this, the US economic docket during the week will be busy. Tier 1 info includes Tuesday’s Conference Board (CB) Consumer Confidence. On Thursday, the US Bureau of Economics will release the Advanced GDP reading ahead of Friday’s unveiling of the Fed’s favorite gauge of inflation, the PCE.
WTI crude oil futures settle down -$0.47 or -0.55% at $84.58
- The low for the day reached $82.66. The high was at $85.82
The price of WTI crude oil futures are settling at $84.58. That’s down $0.47 or -0.55%
The closing level is near the midpoint of the days trading range. The low price reached $82.66. The high price was at $85.82.
EU News
Solid gains for the European indices in trading today
- German Dax and France’s CAC up near 1.6%
The major European indices are ending the day with solid gains. Looking at the closing levels:
- German DAX, +1.58%
- France’s CAC, +1.59%
- UK’s FTSE 100 +0.64%
- Spain’s Ibex, +1.79%
- Italy’s FTSE MIB, +2.0%
BOE Ramsden: We will take the necessary steps to get inflation back to target
- BOEs Ramsden speaking
- we will take necessary steps to get inflation back to target
- we are acutely aware of impact of rate rises so far
- today’s PMI consistent with UK economy being in recession
- we have to take account of the fall in value of the pound
- says a strong has been relatively stable of late
- temporary expanded collateral repo facility will hopefully have a role, not called on yet
- I was reluctant to go down bond purchase route
- not clear that problems and energy markets posed a systemic risk, but hedging strategies were coming under real strain
Other News
Who is the ‘nation-state actor’ in US crosshairs?
- Department of Justice set to hold a press conference
All accounts point to Chinese spies being the suggested ‘nation-state actors’ in this press conference. We’ll see, as it starts in a couple minutes.
Cryptocurrency News
Ripple price action erases gains of the weekend, providing an entry point
- Ripple price action drops over 2% due to worrying events in Asia.
- XRP price action is at a monthly pivot and remains underpinned for now.
- A critical moment is nearing with two technical indicators pointing to a bull rally.
Ripple (XRP) price action is on the back foot after China closed its presidential congress, with President Xi Jinping receiving a third term. Markets did not take his renomination well judging by the theatrics that accompanied it, in which a former minister and critic both were arrested during the congress itself. It shows Xi’s tightening grip on power and only points to a higher probability of a zero-covid policy and a military entry into Taiwan in the coming years.
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