North American News
Major Stock Indices eke out marginal gains in today’s trading session
- S&P index is the biggest mover with a gain of 0.08%
It would be virtually impossible for the 3 US major indices to close unchanged on the day, but today was about as close as you can get.
The final numbers are showing:
- Dow industrial average rose 6.01 points or 0.02% at 34624.26
- S&P index rose 3.19 points or 0.07% at 4453.53
- NASDAQ index rose 1.89 points or 0.01% at 13710.23
A list of some of the gainers today included:
- Lam Research +2.01%
- Apple +1.69%
- Northrop Grumman +1.62%
- visa +1.48%
- Chipotle +1.39%
- Lockheed Martin +1.33%
- Wells Fargo +1.14%
- Costco +1.14%
- Corning +1.1%
- Schlumberger, -1.05%
Losers today included:
- Moderna -9.12%
- Shopify, -4.62%
- First Solar, -3.63%
- Tesla -3.32%
- Target -3.02%
- Block, -2.97%
- Delta airlines -2.53%
- American Express -2.52%
- United airlines -2.34%
- Ford -2.22%
NAHB Sept US housing market index 45 vs 50 expected
- US home builder survey from the National Association of Home Builders for September 2023
- Prior was 50
- Current single-family home sales 51 vs 57 prior
- Sales over next six months 49 vs 55 prior
- Prospective buyers 30 vs 35 prior
The Fed will need to dial down its 2023 core inflation forecast this week
- Morgan Stanley highlights undershooting core inflation
The Fed is due for another set of economic forecasts this week and one interesting spot will be core inflation. The current central tendency is 3.7-4.2% and it looks like the December reading will be below the low end of that range, according to Morgan Stanley.
For core inflation to hit the Fed’s projection, Morgan Stanley economists’ estimates indicate it would need to increase at a 4.5% annual rate in the final four months of this year, after rising at a 2.6% rate over the prior four months. The August PCE report is due on September 29 and the early consensus is +0.2% m/m, the same as in July.
The WSJ highlights that Goldman Sachs and JPMorgan both now see 3.4% y/y core CPI in 2023, well below the Fed at 3.9%.
The question is whether that even matters for the Fed? Officials are watching oil prices run right now and that could filter back into inflation later.The question that matters now is 2025 core inflation and that’s the forecast we should be watching for on Wednesday. The current central tendency is 2.5–3.1%, which isn’t terribly above the Fed’s target but even a tick or two in either direction would be notable.
Risks of inflation being more stubborn than expected should not be ruled out – BIS
- Some token remarks being offered by the BIS
- Residual differences remain between central bank communications and market expectations
- Current build-up of leveraged shorts in Treasury futures is a vulnerability worth monitoring
Weekend – Goldman Sachs strategists expect a Federal Reserve spoof at this week’s meeting
Goldman Sachs are expecting the FOMC’s ‘Dot Polt’ to indicate that the majority on the Committee will indicate one more Fed Funds interest rate rise this year.
GS write that they expect:
- “a narrow 10-9 majority still pencilling in one more hike“
However, say the strategists, this will be:
- “if only to preserve flexibility for now“.
That is, to preserve the option of a November rate hike, not to indicate one is likely.
Goldman Sachs expects an on-hold funds decision at this week’s meeting (Wednesday 20 September, see screenshot below for timngs).
More, in summary from the note:
- FOMC is likely to upgrade its economic growth projections at this week’s meeting
- GDP estimate to 2.1% from 1% prior
- core inflation estimate CPI for 2023 to be lowered to 3.5%, from 3.9% previously
- jobless rate estimate for 2023 to be lowered to 3.9%, from 4.1% prior
- Fed is unlikely to raise interest rates at its Oct. 31-Nov. 1 meeting
- in “November, we think that further labor market rebalancing, better news on inflation, and the likely upcoming Q4 growth pothole will convince more participants that the FOMC can forgo a final hike this year, as we think it ultimately will,”
Yellen: The US is watching oil prices very closely
The economy according to Yellen:
- I see no signs the economy is in a downturn
- Consumer spending remains robust
- Biden wants to make gasoline prices affordable
- I think we’re achieving lower inflation
- There’s absolutely no reason for a government shutdown
- Labor market cooling but without significant layoffs
US Auto Workers strike continues. A 21% pay increase was made and rejected
The strike by the US United Auto Workers is ongoing. The latest is that the union is rejecting an offer from one of the Big Three automakers, Chrysler parent Stellantis, for a 21% wage increase:
- A cumulative 21% wage increase
- With an immediate 10% increase upon a formal agreement.
The union is seeking a four-day work week, substantial pay raises, more paid time off and pension benefits, among other demands.It wants a 40% pay increase to match the average pay increases of the CEOs at the three companies in recent years.
Morgan Stanley says the US is in a disinflationary process, lower their inflation forecast
A Morgan Stanley note from Friday ICYMI, saying that the data on inflation that was out during the week, for US CPI and PPI “point to a quicker progression in the disinflationary process”. And add that the slower momentum is “notable”.
Morgan Stanley have thus lowered their forecast for core PCE inflation in 2023 and 2024:
- 3.3% 4Q/4Q this year (from 3.4%)
- 2.2% in 2024 (from 2.3%)
Canada August producer price index +1.3% m/m vs +0.5% expected
- Canadian PPI for August 2023
- Prior was +0.4% (revised to -0.1%)
- Producer prices y/y -0.5% vs -2.7% expected
- Raw materials price index +3.0% vs +3.5% m/m prior
- Raw materials price index -4.3% vs -11.1% y/y prior
Commodities
Silver extending its search for $24 ahead of Wednesday Fed rate call
- XAG/USD going higher as the metal turns bullish from the floor near $$22.40.
- Precious metals, commodities recovering ahead of Fed rate call.
- The Federal Reserve is set to stand pat on rate hikes, bolstering risk assets.
The price of Silver has recovered from the recent backslide into the $22.30 region, reclaiming $23.20 in Monday trading. Commodities are broadly turning higher ahead of the Fed rate call on Wednesday, where the FOMC is expected to hold rates at 5.5%.
WTI crude oil futures settle at $91.48
- Up $0.71 or 0.78%
WTI crude all future settle at $91.48. That’s up $0.71 or 0.78% on the day.
- Prices initially rose due to a softer Dollar and stock recovery.
- Bullish themes include Saudi/Russia production cuts and a recovering Chinese economy.
Saudi Aramco CEO commented at the World Petroleum Congress saying:
- Forecasts of peak oil demand are “wilting under scrutiny”.
- He predicts world oil demand to rise to 103-104mln BPD in H2.
Meanwhile:
- Chevron (CVX) CEO expects oil prices to reach USD 100/bbl.
- He also sees a steady increase in oil demand.
Oil continues its incredible run as it climbs another $1
- Oil picks up where it left off
Today, November WTI is up $0.94 to $90.98 while the October contract, which is thinning out, is up $1.03 to $91.82.
Here’s a good point from Marious Hadjikyriacos from XM “What’s striking is that this relentless oil prices rally has taken place even amid concerns about lower demand from European and China as those economies grapple with a severe slowdown, which demonstrates just how tight the supply side of the equation has become.”
One pushback to that is that China appears to be building inventories and that should relent in October. At the same time, Indian demand remains robust and the US economy is humming along.
Saudi Arabia certainly wants a tighter market as the latest numbers show July exports fell 11.6%. Real time numbers show a bounce but it’s not enough to loosen the market.
The real question is where OPEC+ wants oil prices. Surely they see a limit somewhere because they don’t want to incentivize fresh drilling in US shale or elsewhere. Is that $100? Or will they want to squeeze the market even higher? Many think there isn’t material demand destruction until $120 so we may have to test that thesis.
Even at current levels, oil prices could give central banks a headache and result in a higher-for-longer scenario.
EIA sees US shale oil production down about 41k bpd in October
That follows at 27k bpd decline in September
US drilling productivity is improving but falling rigs may be catching up to shale oil regions. The EIA sees total production at 9.391m bpd in October, which is a 41k bpd fall. The declines are split almost evenly between the Permian and Eagle Ford.
Brent – the oil price is “exposed to further price spikes in 2024”
Summary comments from ANZ on oil, saying that conditions are in place for even higher prices into year end and 2024.
On the supply side:
- Production cuts, led by Saudi Arabia, stabilised the market in July but are now likely to push the market into a 2mb/d deficit in Q4.
On demand growth rising:
- China’s demand has remained resilient, with domestic oil refiners ramping up processing to a record level last month. This has been aided by strong summer demand for fuels … as economic activity picks up.
- India and the US have been surprising sources of strength.
- Global oil demand is on track to grow at 2.1mb/d in 2023, an estimate backed up by OPEC and IEA. Both energy groups warned that the oil market would shift into a significant deficit through the year-end.
ANZ conclude:
- The subsequent drawdown in inventories in Q4 leaves the market exposed to further price spikes in 2024.
Former JPMorgan gold trader sentenced to 6 months in prison on spoofing charge
A former JPMorgan gold trader was sentenced to serve six months in prison on Friday. A Chicago judge handed down the sentence in relation to the placement of deceptive orders between 2008 and 2010.
As background, spoofing involves placing large buy or sell orders with no intention of executing them. These orders are quickly canceled but not before they create a false impression of market demand (or supply), influencing prices.
EU News
European equity close: Rought start eases most of last week’s gains
- Substantial selling hits European equities
Closing changes:
- Stoxx 600 -1.2%
- German DAX -1.1%
- UK FTSE 100 -0.8%
- French CAC -1.5%
- Italy MIB -1.3%
- Spain IBEX -0.9%
SNB total sight deposits w.e. 15 September CHF 473.0 bn vs CHF 468.9 bn prior
- Latest data released by the SNB – 18 September 2023
- Domestic sight deposits CHF 463.6 bn vs CHF 459.5 bn prior
UK data – Rightmove House Price Index +0.4% m/m (prior -1.9%)
The Rightmove House Price Index is a gauge of asking prices for UK homes.
It picked up in September to +0.4% m/m
- prior -1.9%
for the y/y -0.4%
- prior -0.1%
Comments from the report for the month in summary:
- BoE’s 14 consecutive interest rate rises contributed to unusually slow activity in August
- expects a bounce in activity in the autumn as market conditions improve
- the number of home sales was down 7% compared with 2019, before the pandemic
- there were signs activity was starting to pick up, as the number of homes on the market rose 12% in the first week of September compared with the unusually low weekly average in August
French government plans to allow the sale of fuel at a loss to help contain inflation
The Prime Minister of France Elisabeth Borne spoke in interview and dropped the news in that the government plans to allow gas stations to sell fuel at a loss. A 1963 law prohibits this but that law will be overridden for a period a limited period of a “few months.”
- She ruled out the government cutting fuel duties.
- “With this unprecedented measure, we will get tangible results for French people without subsidizing fuel”
Goldman Sachs lowers BOE terminal rate forecast to 5.50%
- That is down 25 bps from their previous 5.75% forecast
The firm now sees the BOE pausing in November as opposed to their previous view that the central bank would hike, noting that:
“Looking ahead to the November meeting, we see a greater chance that sequential wage and price pressures will have cooled sufficiently to allow the MPC to go on hold, given their preference for a flatter peak.”
ECB’s Kazimir says cannot rule out further rate hikes
- Remarks by ECB policymaker, Peter Kazimir
- I wish that September rate hike was the last one
- But cannot rule out further moves
- Only via the March forecast next year can we confirm the path towards inflation goal
- End of rate hikes is to open debate on how to adjust PEPP and APP
- Once it is clear that no more rate hikes are needed, debate should be on how to speed up QT
Other News
China holdings of US Treasuries fall to $822B billion in July vs $835B in June
- China Treasury holdings decline
Today, US Treasury Secretary Yellen said they wanted to ‘de-risk’ from the China relationship. It seems as though China feels the same way.
China central bank and forex regulator meets with foreign financial institutions
- The meeting is said to include Morgan Stanley, HSBC, Deutsche, and also the likes of Tesla and BASF
The PBOC is out with some comments noting that China will improve its policies and create a more market-oriented and international-level business climate. I would look past the smoke and mirrors here as the meeting seems to involve the forex regulator for some reason.Also, there are plenty of things going on behind the scenes in China right now.
China says yuan will show ‘positive changes’ against dollar after ‘bottoming out’
- Is Beijing drawing a hard line on the yuan weakness against the dollar?
This is via the latest publication from the Chinese central bank and it’s not entirely clear if they mean after the yuan has bottomed out or if they are hinting that it already has. But at least in the past week, they have shown that they are quite willing to stop the rot in the yuan.
Chinese police detain Evergrande’s wealth management staff
Evergrande is one of China’s massively indebted property developer firms in the maelstrom of a property market crisis that is dragging on China’s economic growth.The group is undergoing a restructuring plan, including offloading assets, to avoid defaulting on $340 billion in debt.
News is crossing that some staff at the firm’s wealth management unit have been detained by local police in Shenzen. Summary of news items:
- Shenzhen police said authorities “took criminal coercive measures against suspects including Du and others in the financial wealth management (Shenzhen) company under Evergrande Group.”
- It was unclear who Du was. Its probably Du Liang, head of the company’s wealth management unit.
- Evergrande did not immediately answer questions seeking comment.
China Evergrande shares dump 25% in HK after police detained some wealth management staff
The shares price of the besieged developer have plunged 25% on Monday after this news. Lowest share price in two weeks.
New Zealand economists expect 2023/24 GDP at 0.4%, from 0.6% previously – NZIER survey
The latest New Zealand Institute of Economic Research (NZIER) Consensus Forecasts in brief:
- Annual average GDP growth is forecast to slow to 0.4 percent in the year to March 2024 before recovering to just 1.1 percent in 2025.
- Higher interest rates are starting to dampen demand as the impact of previous increases in the Reserve Bank’s Official Cash rate (OCR) is transmitting through to the broader economy.
- Added to this is the downside risk from weaker demand for New Zealand exports, primarily due to the weaker growth outlook in China.
- Offsetting these are the upside risks from the strong recovery in net migration, which will likely support demand over the coming years.
- The inflation outlook for the year ending March 2024 has been revised higher. Annual CPI inflation is forecast to ease to 4.3 percent before decreasing to 2.4 percent in 2025.
New Zealand Services PMI for August 47.1 (prior 48.0)
The BNZ – BusinessNZ Performance of Services Index (PSI) for August 2023 comes in at 47.1, back to levels last seen in January 2022
- prior 48.0
- third consecutive drop in activity levels
- long-term average is 53.5
BusinessNZ chief executive Kirk Hope:
August result showed little in the way of a road to recovery
- “The proportion of negative comments stood at 63.9% in August, compared to 67% in July and 55.6% in June. Overall, negative comments received were strongly dominated by uncertainty regarding the upcoming General Election, as well as continued adverse economic conditions”
BNZ Senior Economist Doug Steel:
- “the latest PCI readings suggest any bounce through the Q2 GDP figures will be short lived and are consistent with economic contraction returning. In this sense, the PMI and PSI results are more consistent with the RBNZ forecast of a return to recession than the Treasury’s latest forecasts of moderate growth ahead”
Singapore August exports fall more than expected
Singapore Non-oil Domestic Exports (NODX) in August 2023:
- -3.8% m/m vs +5.5% expected
- -20.1% y/y vs. -15.8% expected
Singapore is heavily reliant reliance on international trade. It’s a small and open economy where exports play a significant role in driving economic growth and employment.
Cryptocurrency News
Shiba Inu whales move 1.52 trillion SHIB overnight, meme coin gears for recovery
- Shiba Inu has registered a spike in large volume transactions in the last 24 hours.
- SHIB tokens worth $11.11 million were moved in whale transfers, signaling increase in user activity.
- SHIB price climbed nearly 5% since September 11 low of $0.00000695.
Shiba Inu, one of the largest meme coins in the crypto ecosystem, seems to be gearing towards a price recovery, according to the latest on-chain developments. Large volume transfers initiated by whales moved 1.52 trillion SHIB tokens in the past 24 hours.
New York financial regulator to set higher standards for token listing, delisting
- The New York Department of Financial Services is set to publish new guidance for crypto firms on Monday, according to a Wall Street Journal report.
- The financial regulator has asked virtual currency companies to upgrade to higher listing, delisting standards and protect user funds.
- The regulator proposed the new rules, which are open for comments until October 20, after identifying new risks.
New York’s State Department of Financial Services (NYDFS), the regulator responsible for financial services and products registered by firms within the state, is about to issue new guidance for crypto firms with the aim to improve transparency about the process of listing and delisting crypto assets.
According to a report from The Wall Street Journal, the regulator will require higher listing and delisting standards for tokens. It also urged virtual currency firms to submit new policies to improve transparency in the sector.
Follow our recently launched pages. Join our community and never miss a beat in the dynamic world of trading.
https://www.facebook.com/BilalsTechLtd
https://www.linkedin.com/company/bilals-tech/
