North American News
Stocks moving higher is still a hard uphill road to travel.US nonfarm payroll strong
In the US equity market, the major indices moved higher initially at the open, and then gave back all the gains and traded lower, before rebounding and closing higher for the day.
- Dow industrial average closed up 403.53 points or 1.26% at 32404.79
- S&P closed up 50.72 points or 1.36% at 3770.60
- Nasdaq closed up 132.32 points or 1.28% at 10475.26
- Russell 2000 closed up 20.13 points or 1.13% at 1799.86
For the week, the major indices still closed lower.
- Dow industrial average fell -1.39%
- S&P index fell -3.34%
- NASDAQ index tumbled 5.65%
- Russell 2000 fell -2.54%
In the US debt market today, the yield curve steepened with the shorter end lower and the longer end higher.:
- 2 year is trading at 4.66%, -4.1 basis points
- 5 year is trading at 4.332% -1.9 basis points
- 10 year is trading at 4.164% +4.1 basis points
- 30 year is trading at 4.257% +10.5 basis points
US October non-farm payrolls +261K vs +200K expected
- October 2022 US employment data from the non-farm payrolls report
- Prior was +263K (revised to +315K)
- Unemployment rate 3.7% vs 3.6% expected
- Prior unemployment rate 3.5%
- Participation rate 62.2% vs 62.3% prior (was 63.4% pre-pandemic)
- U6 underemployment rate 6.8% vs 6.7% prior
- Average hourly earnings +0.4% m/m vs +0.3% expected (prior +0.3%)
- Average hourly earnings +4.7% y/y vs +4.7% expected (prior 5.0%)
- Average weekly hours 34.5 vs 34.5 expected
- Change in private payrolls 233K vs +200K expected
- Change in manufacturing payrolls +32K vs +15K expected
- Household survey -306K vs +204K prior
Commodities
Gold soars to resistance around $1670 after hitting a three-week high
- The American Dollar has difficulty finding its feet, down 1.39%, as shown by the US Dollar Index.
- Speculations that the Fed would tighten in smaller increases mounted as the labor market gave signs of easing.
- The US 2s-10s yield curve inversion, the deepest since the 1980s, and US recession fear increased.
Gold price continues to extend its rally in the October US Nonfarm Payrolls report aftermath, up by more than 2.50%, in growing speculations that an uptick in the rate of unemployment might deter the Federal Reserve from aggressive tightening. However, Federal Reserve Chairman Jerome Powell said the Federal Funds rate (FFR) peak would be higher than September’s projections. Therefore, the XAUUSD is trading at around $1672 amidst a volatile trading session.
The US Unemployment Rate is approaching to 4%, a headwind for the US Dollar
Following the release of the Nonfarm Payrolls, the US Dollar falls further. The US economy added 261K jobs, above estimates of 200K, but what probably rocked the boat was that the Unemployment Rate increased by 3.7% from 3.5% in the previous month, signaling that the labor market is easing amid the most aggressive Federal Reserve tightening cycle. Also, Jerome Powell’s words that the Fed might begin to slow its pace of increases “as soon as the next meeting” is a headwind for the greenback.
The US 2s-10s yield curve inverted the most in 40 years as recession drums got louder
In the meantime, US Treasury bond yields, particularly the 10-year benchmark note rate, almost parked at 4.156%, unchanged. However, what’s grabbing the attention is the inversion of the 2s-10s yield curve, which is used as a leading indicator of upcoming recessions. At the time of typing, the spread between the US 2s and 10s is -0.534%, and it’s the highest inversion of the curve since the 1980s, as the US 2-year bond yield sits at 4.694%.
Of late, some Fed speakers are crossing newswires, led by the Boston Fed President Susan Collins. She said that she supports 75 bps increases if needed, added that inflation is too high and that the Fed “must restore price stability. According to Collins, the Fed’s monetary policy “is now in restrictive territory.” Later, Richmond’s Fed President Thomas Barkin said that the jobs report was about as he expected, though he added that the labor market remains tight and that there’s some work left to do.
Silver thrashes resistance at $20.00 and approaches $21.00
- Silver prices surge 7% to hit three-week highs near $21.00.
- The US dollar falls as US labor markets show signs of easing.
- XAGUSD has reached an important resistance level at $20.90.
Silver prices skyrocketed on Friday, propelled by a weak US dollar, following a mixed US Non-Farm Payrolls report. The precious metal appreciated about 7% on the day, breaking beyond the top of the last two weeks’ trading range, around $20, to hit three-week highs at $20.80 so far.
The US dollar dives as the labor market show signs of easing
The release of the US Non-Farm Payrolls report sent the US dollar tumbling earlier today. Non-Private payrolls increased to 261K in October, beating expectations of a 200K rise, and September’s figures have been revised up to 315K from the 264K initially estimated.
On the other hand, the unemployment rate has increased to 3.7% from 3.5% in September and wage inflation slowed down to 4.7% from 5% over the previous month. These figures suggest that labor market conditions might be easing, which brings the possibility of a dovish pivot in December back to the table.
XAGUSD approaching resistance at $20.95
From a technical point of view, silver is now right below an important resistance area at $20.90, where October 6 and 7 highs meet the 38,2% Fibonacci Retracement of the April – September decline.
With the pair now reaching overbought levels in hourly and daily charts, the possibility of a moderate pullback before further rally should be contemplated.
On the Upside, above $20.90, the next potential targets are October 4 high at $21.25 and. The 200-day SMA at 21.55.
On the downside, the intra-day level at $20.55 is holding bears for the time being, with the next potential targets at $20.00 previous resistance, and the 50-day SMA at $19.20.
Oil gets a double dose of good news, climbs more than 4%
- WTI crude oil up $3.95 to $92.09
Oil is in demand today for two big reasons:
- China is taking clear steps towards reopening. Xi today said China will continue to open up , there are reports on a plan to scrap covid flight suspensions and the former chief eipdemiologist at China’s CDC said substantial changes will take place soon
- The G7 and Australia agreed to the long-rumored Russian oil price cap and it will have a hard cap
Obviously, global demand for oil is coming under pressure due to slow economies but that’s counteracted with OPEC pumping less this month, SPR releases running off and the Russia news.
EU News
Vitol threatens to cut off German natural gas in $1 billion standoff
- Bloomberg report
Germany is trying to squeeze energy trading firms in the search for gas but it will be a fight.
I think the market is underestimating the risks around gas this winter. Spot prices have come down but that’s because storage is full. If the weather is cold this winter, that storage will be quickly exhausted and prices will jump again. In the spring, the battle to refill storage will restart.
BOE’s Bailey says won’t sell gilts when sales might increase market dysfuction
- Comments from the BOE Governor
- BOE will not sell gilts into febrile markets whereby the bank’s sales might increase the level of dysfunction, such that value for money cannot be achieved
- Maxiumum sizz of the APF can be adjusted down from £966B to £886B after conclusion of emergency gilt purchases
Gilt yields are pushing a bit higher today but that’s generally in line with global bond markets. 10s are up 5.1 bps to 3.56%.
Other News
Evans: It’s likely Fed funds peak will be revised ‘slightly higher’ in December
- Comments from the Chicago Fed President
- Note that the December meeting will be the final one for Evans before he retires
- There’s ample capacity to hike even with smaller increments
- Inflation lags more than the real economy, need time to assess
- A 50 bps hike is still a very large hike
- Inflation reports are still likely to be disappointing
- If inflation isn’t favorable and you still want to hike expeditiously ‘you can do 50 bps repeatedly’
- It’s likely Fed funds peak will be revised ‘slightly higher’ in December
- Fed is looking for the right level of restrictiveness
This is the first indication of how much higher the Fed is thinking about going in 2023. ‘Slightly higher’ might puts anything in the 4.75-5.50% range in play. The Fed funds market is at 5.10%.
Fed’s Brainard: Current macro environment raises risks of financial shocks
- Comments from Brainard and in the Fed’s financial stability report
- Treasury market has functioned smoothly since last report in May
- Market liquidity remained low in several key areas and that could amplify volatiltiy and may ultimately impair market functioning
- Economic outlook has weakened, uncertainty remains elevated
China’s Xi: We will continue to open up and pursue win-win cooperation
- Comment from Xi after more reopening reports
Chinese markets ripped today, of course it’s the day after Tiger Global bails on Chinese stocks.
Cryptocurrency News
Bitcoin Weekly Forecast: BTC’s consolidation leaves holders questioning if $28,000 is still valid
- Bitcoin price pauses downtrend as it breaks out, but the lack of momentum suggests consolidation.
- On-chain data shows large transactions worth $100,000 or more have spiked over the last week, indicating that Bitcoin whales are returning.
- A daily candlestick close below $17,593 will invalidate the bullish thesis for the big crypto.
Bitcoin (BTC) price shows a consolidative structure despite the Federal Reserve’s hawkish tone on November 2. Regardless of the macroeconomic impact of this development, BTC continues to hover in a tight range.
Investors need to be careful as this rangebound movement could result in an explosive move. Since the technical and on-chain metrics point to different outlooks, the direction of this breakout is yet to be determined.
Join Our Whats App Group for all the latest stock market news
https://chat.whatsapp.com/KuCI3obDFfz7J6QI8tK1fX
