Round up of today’s market news

North American News

US Major Indices Close Lower Amidst Early Challenges, Tamping Down Enthusiasm

• Markets anxious about the FOMC rate decision tomorrow

The major US indices experienced a downward trend throughout the day, signaling a bearish sentiment in the market. However, as the trading day progressed, these indices showed resilience by staging a late-day rebound, mitigating some of the earlier losses.

Adding to the complexity of the trading session, yields proved to be a headwind for investors. The 10-year yield surged by 4.6 basis points, while the 5-year yield saw an increase of 5.5 basis points. These yield levels are notably reminiscent of the financial landscape of 2007, adding a layer of concern to the current market dynamics.

The equity markets are displaying a sense of anxiety ahead of the upcoming Federal Open Market Committee (FOMC) rate decision scheduled for tomorrow. With uncertainty surrounding potential changes in monetary policy, investors are closely watching how yields and market indices will be influenced in the near future. The resurgence of yield-related concerns has further heightened apprehension within the financial markets as they brace for the FOMC’s decision and its potential implications.

The major indices settled into a sideways flow after pulling back from their afternoon highs.

Treasuries settled with losses across the curve. The 2-yr note yield rose eight basis points to 5.12% and the 10-yr note yield rose five basis points to 4.37%.

A snapshot of the closing levels shows:

• Dow industrial average minus 106.59.4 -0.31% at 34517.72
• S&P index -9.58 points or -0.22% at 4443.94
• NASDAQ index -32.06 points are -0.23% at 13678.18

The US Treasury auctions off $13B of 20 year notes at a high yield of 4.592%

• WI level at the time of the auction was 4.595%

• WI level at the time of the auction: 4.592%
• High Yield: 4.595%
  • Previous: 4.499%
  • Six-auction average: 4.055%
• Tail: -0.3bps
  • Previous: 0.9bps
  • Six-auction average: -0.2bps
• Bid-to-Cover: 2.74X
  • Previous: 2.56x
  • Six-auction average: 2.64x
• Dealers: 9.27%
  • Previous: 11.4%
  • Six-auction average: 10.7%
• Directs: 25.36%
  • Previous: 20.2%
  • Six-auction average: 19.7%
• Indirects: 65.36%
  • Previous: 68.4%
  • Six-auction average: 69.7%

Atlanta Fed GDPNow Q3 growth 4.9%

• Atlanta Fed GDPNow tracker for Q3 growth

The Atlanta Fed GDPNow estimate for the Q3 came in at 4.9% unchanged from the September 14 estimate.In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 4.9 percent on September 19, unchanged from September 14 after rounding.After recent releases from the US Census Bureau and the US Bureau of Labor Statistics, the nowcast of third-quarter real residential investment growth decreased from 6.8 percent to 6.3 percent, while the nowcast of the contribution of inventory investment to third-quarter real GDP growth decreased from 1.20 percentage points to 1.05 percentage points.

Instacart begins trading. Opens at $42. IPO price $30

• $14B capitalization

The IPO price was set at $30 a share.The official opening price on the NASDAQ index came in at $42 a share.That is a 40% increase from the IPO price.The market capitalization is up around $14B.

Some IP facts:

• 22 million shares were sold in the IPO: 14.1 million from Instacart and 7.9 million from existing shareholders.
• In early 2021, Instacart had a valuation of $39 billion, raising money at $125 a share.
• Instacart’s business model shifted to prioritize profitability over growth.
• Q2 revenue was $716 million, a 15% increase, with a net income of $114 million.
• Instacart’s valuation is about 3.5 times its annual revenue.
• Sequoia Capital is the largest investor in Instacart with a 15% stake.
• Instacart co-founder Apoorva Mehta has shares worth over $800 million and is selling a portion in the IPO.
• Fidji Simo, ex-Facebook executive, succeeded Mehta as CEO in 2021 and will become the chair after the IPO.
• Only 8% of Instacart’s shares were floated in the offering, with 36% of those sold by existing shareholders.

US housing starts 1.283M versus 1.440M estimate

• US housing starts and building permits for August 2023

• Prior month for housing starts 1.447M revised from 1.452M
• Housing starts 1.283M versus 1.440M estimate. That’s the lowest level since June 2020 during the pandemic
• Building permits 1.543M vs 1.443M estimate. Prior month building permits 1.442M. The high level for the year came in at 1.55M in February

US 5-year yield reaches the highest level since 2007

• 5-year yield reaches 4.513%

The US 5-year yield has reached 4.513%. That takes the yield to the highest level since August 2007. Looking at the weekly chart, the next part comes in at 4.875% followed by the swing high going back to 2006 at 5.240%.

Meanwhile, the 10-year yield extended the high from yesterday to 4.363%, and that is also the highest level since November 2007.

Instacart projected at $39 as the open trade horse jockeying continues

• The projections is now over $10B

As stocks trade to new session lows with the NASDAQ index now down -0.89% and the Dow industrial average and S&P index down -0.68% each, the horsejacking continues for the Instacart IPO (symbol CART). A total of 22 million shares were sold in the IPO: 14.1 million from Instacart and 7.9 million from existing shareholders.

Late yesterday, the price was set at $30 implying a market capitalization of $9.9 billion. The premarket indications are up at $39 as buyers push the price higher ahead of the first trade. During the Covid pandemic (early 2021), the high valuation reached upwards of $39 billion. So there are a number of late investors who are underwater on their investment.market capitalization of $9.9 billion. The premarket indications are up at $39 as buyers push the price higher ahead of the first trade. During the Covid pandemic, the high valuation reached upwards of $39 billion. So there are a number of late investors who are underwater on their investment.

Recall last week that chip company, Arm Holdings, went public at an IPO price of $51 per share (the price opened at $56.10). The price soared to $69 on its 2nd day of trading, but has since moved lower and currently trades at $54.63 (down -5.79% today). The low price of today reached $53.90 at the lowest level since the IPO.

US auto worker strike: Stellantis’ latest offer could lead to the closure of 18 facilities

US automaker Stellantis (Chrysler parent) is one of the US ‘big 3’ automakers others are GM and Ford that are hit by the strike.

CNBC updates the latest, citing ‘sources familiar with the discussions’:

• The most recent contract proposal by Stellantisto the United Auto Workers union could lead to the closure of 18 U.S. facilities
• but it could also bring new investments and repurpose an idled vehicle assembly plant in Illinois
• The plans would likely affect thousands of UAW members, shrink the automaker’s North American footprint and create a new “modernized” parts and distribution network, which company and union leaders were at odds over

Former Fed Pres Lockhart: The Fed is likely to pause tomorrow

• Lockhart speaking on CNBC

• Fed likely to pause
• Fed will likely be more neutral
• Longer rates are taking on the expectations of a soft land and benign view of the future
• I expect the Fed to stay higher for longer, but expect a transition by the end of the year
• On core inflation, the narrative is playing out, but not on a path to 2% objective. Will keep the Fed cautious.

Geopolitical:Biden speaking at the UN General assembly

• US Pres. Biden speaking at the UN
• US seeks to responsibly manage competition with China
• US will stand to work together with China on issues including climate crisis
• US mobilizing to finance infrastructure projects around the world, while avoiding trap of sustainable debt
• US working with other countries to straighten rules to govern AI
• AI has potential for opportunity and peril
• We need to govern AI, not AI govern us.
• US is mobilizing to finance infrastructure projects globally while avoiding unsustainable debt traps.
• No U.S. partnerships are about containing any country.
• We aim to responsibly manage competition with China.
• Russia shredding arms control agreement
• We will push back on aggression and intimidation, and defend rules of the road.
• We condemn North Korea’s continued violation of UN Security Council resolution, committed to diplomacy
• Calls Ukraine wore an illegal war of conquest
• US strongly supports Ukraine and its efforts to bring about just and lasting peace
• Russia alone stands in the way of peace

Treasury Secretary Yellen:Sees a healthy cooling in the US labor market without mass layoffs

• US Treasury Secretary Yellen speaking
• Sees healthy calling and US labor market without mass layoffs
• US economy can withstand risks from auto strikes, government shutdown and the resumption of a student loan payments

Morgan Stanley says investors are expecting equity weakness into 2024

A snippet from Morgan Stanley on US equities.

• Analysts at the firm, who until recently were persistently bearish on stocks, say that investors have now extended out their expectations of the timing of equities weakening into 2024.

Finding it difficult to fully abandon their bearishness it seems.

Bank of America joins in on US ‘disinflation’ – its on track and consumer is flexing

• “Disinflation” has been popping up in analyst notes all over the place

Bank of America are on board:

• The August CPI, PPI & retail sales data leave our core views unchanged. Disinflation is on track and the consumer is resilient.
• The Fed’s message … is likely to be balanced. The dots for 2024 and beyond should show slower cuts and a higher r*.

BoA do have 2 concerns though:

• The recent UAW strike which has shut down auto production
• Chances of a government shutdown on October 1 are rising

US autoworkers strike: A hit to the US economy and an inflationary impulse

Bank of Montreal analysts on the autoworkers strike, say the impact will be across multiple facets:

• The most immediate of which will be the associated increase in new car prices with used vehicles quick to follow. The inflationary impulse will be exacerbated by the recency of the impact on supply from the pandemic-inspired chip shortage and other supply chain strains. Dealerships undoubtedly still have copies on hand of ‘car sales and a guide to profiting in a global pandemic’.

Also:

• the hit to gross production which, when combined with the potential for a government shutdown (and the associated uncertainty) could materially undermine economic confidence during the balance of 2023.

And, on wages fuelling inflation:

• By layering in the wage component as autoworkers seek improved pay packages, Powell has a new wrinkle in his endeavour to avoid a wage-inflation spiral. The impact of collective bargaining was always a wildcard during this cycle, and it will be interesting to see if union activity overwhelms the otherwise moderating pace of nominal wage growth.

Bank of Canada’s Kozicki: Big drivers in August CPI inflation was energy & gasoline prices

• Bank of Canada Deputy Gov. Kozicki speaking

Bank of Canada Deputy Gov. Sharon Kozicki is speaking and says:

• One of the big drivers in August CPI inflation was energy and gasoline prices. They can be pretty volatile
• It will take a lot of time to sort through the inflation data, given what’s going on underneath
• Energy prices on their own, if it’s temporary, is something that gets much less weight because we are concerned about the underlying inflation

Canadian Finance Minister Freeland said government will do all it can to stabilize prices

The comments came in reference to Industry Minister François-Philippe Champagne and Finance Minister Chrystia Freeland meeting on Monday with the heads of Canada’s five largest grocery chains.

The 5 chains have “agreed to work with” the federal government to stabilize food prices said Champagne. More:

• “As you would expect, those are difficult discussions but much-needed discussions at a time that Canadians are feeling the high prices of groceries,”
• “I appreciate the constructive nature of the discussions we had. Bottom line is that they agreed to work with the government to stabilize food prices in Canada.”

Stabilzing prices would further support the Bank of Canada remaining on hold.

Canada August CPI 4.0% versus 3.8% expected

• Details of Canada CPI for the month of August 2023

• Prior month 3.3%
• CPI MoM 0.4% % versus 0.3% expected
• Prior MoM 0.6%
• CPI YoY 4.0% % versus 3.8% expected

Core measures:

• BOC Core YoY 3.3% versus 3.2% last month
• BOC Core MoM 0.1% versus 0.5% last month
• CPI median 4.1% versus 3.9% last month (revised from 3.7%
• CPI Trim 3.9% versus 3.6% last month
• CPI Common 4.8% versus 4.8% last month

Highlights:

• The rise in August’s CPI was majorly due to higher gasoline prices (+0.8%) compared to a decrease in July (-12.9%).
• Excluding gasoline, the CPI growth was consistent at 4.1% for both August and July.
• Canadians experienced higher rent, mortgage interest, and energy costs in August.
• Prices for travel-related services decreased, and food price growth slowed compared to the previous month.
• The monthly deceleration was largely due to drops in travel tours (-6.4%) and air transportation (-6.9%) prices after the July summer travel peak.
• On a seasonally adjusted basis, the monthly CPI growth was 0.6%.

Commodities

Gold pulls back from two-week high as Fed’s decision looms

• Gold price hit a two-week high at $1937.35 before retreating to $1931.77, down 0.06%.
• US 10-year Treasury bond yield reaches a 16-year high at 4.367%, weighing on gold.
• Investors keenly await the Federal Reserve’s ‘dot plots’ and updated economic projections for rate hike clues.

Gold price retreats after hitting a two-week high at $1937.35 as investors remain on the sidelines ahead of the US Federal Reserve monetary policy decision.US Treasury bond yields are climbing ahead of the Fed’s decision, a headwind for the yellow metal, which was shy of clashing with the 100-DMA.

WTI crude oil futures settle at $91.20

• Down $0.28 or 0.33%

October WTI crude oil futures are several and $91.21. That’s down $0.28 or -0.33%

Citi says oil could briefly touch $100/bbl, but even $90 is not sustainable

A note from Citigroup commodity analysts via CNBC (gated).

Analysts at the bank say Oil prices may head toward $100 “for a short while”, citing output cuts and geopolitical tensions. But that level is not sustainable and the price is likely to drop into the end of the year:

• “The Saudi appetite to withhold oil from market, supported by Russia maintaining a certain level of export constraint, points to higher prices in the short term, all else equal, but $90 prices look unsustainable given faster supply growth than demand growth ex-Saudi/Russia,”
• “Higher prices in the near term could make for more downside for prices next year,”
• production is rising among non-OPEC+ members like the US, Brazil, Canada, and Guyana.Even Venezuelan and Iranian exports have grown.

Forecasts:

• see oil averaging $84 in Q4 2023
• see it in the low-$70 range in 2024

Oil to $100 next?

• ING sees such a scenario as being in play for now

In a week where things are starting off rather quietly, oil continues to sizzle as we see WTI crude touch above $92 today. The unrelenting push higher now sees oil pushing closer towards the highs from October and early November last year, at around $93.25-73 next. So, is $100 oil set to return in the near future? ING definitely sees that as being in play.

“Oil prices remain well supported, with ICE Brent edging closer towards US$95/bbl as the market continues to become increasingly concerned over the tightness in the oil balance for the remainder of the year. The tightness in the market is also well reflected in the structure of the forward curve. Tightening fundamentals have attracted speculators back into the market with both the managed money net position as well as the spreading position seeing meaningful increases over the last reporting week.

Given the constructive fundamentals and more positive sentiment, we could see ICE Brent breaking above US$100/bbl in the not-too-distant future.However, such a move would likely be unsustainable, leading to growing political pressure, whilst the Saudis and the broader OPEC group will probably not want to push the market too high, given the demand destruction risks this could create.”

ICYMI – Chevron’s CEO sees oil prices getting “close” to reaching the $100-a-barrel level

Chevron CEO Mike Wirth spoke in an interview on Bloomberg TV.He outlined his reasoning for expecting even higher prices:

• “Supply is tightening, inventories are drawing … the trends would suggest, we are certainly on our way, we are getting close (to $100/bbl),”
• he sees some impact from higher oil prices on the U.S. and global economy, but underlying drivers remain healthy.“It’s a drag on the economy, but one that thus far the economy has been able to tolerate.”

EU News

European indices close the session mostly higher. German DAX is the exception

• German DAX falls -0.40%

The major European indices are closing the session modestly higher. The exception is the German DAX which fell -0.40%.

Looking at the closes:

• German DAX -0.40%
• Frances CAC +0.08%
• UK’s FTSE 100 +0.09%
• Spain’s Ibex +0.48%
• Italy’s FTSE MIB +0.60%
• Portugal’s PSI 20 up 0.45%

Eurozone August final CPI +5.2% vs +5.3% y/y prelim

• Latest data released by Eurostat – 19 September 2023

• Prior +5.3%
• Core CPI +5.3% vs +5.3% y/y prelim
• Prior +5.5%

Eurozone July current account balance €20.9 billion vs €35.8 billion prior

• Latest data released by Eurostat – 19 September 2023

The current account surplus narrowed in July but remains in a much healthier position compared to last year, as goods balance also shows a much improved picture amid better energy price developments.

Switzerland August trade balance CHF 4.05 billion vs CHF 3.13 billion prior

• Latest data released by SECO – 19 September 2023
• Prior CHF 3.13 billion

ECB are done hiking, rate cuts seen in Q3 next year – poll

• The latest from Reuters poll on economists on the ECB

All 70 economists polled anticipate that the ECB is to hold the deposit rate unchanged at 4.00% until year-end. Meanwhile, 41 of 70 economists (~59%) see the ECB waiting until at least Q3 next year i.e. July at the earliest before taking the step to cut rates. Here are some of the comments from the poll:

“It will probably be some time before the ECB will describe it as such, but 4.00% is likely t o be the terminal rate, in our view. Lagarde apparently did not want to say rates have peaked… However, the hurdle to a further hike does feel relatively high.” – Deutsche Bank

“Another rate hike is not our base case, but there is a fair risk a hike could materialise if wage growth and inflation remain strong through December.” – Rabobank

In terms of the balance of risks for rate cuts, 23 of 38 economists replying to the question say that the risk is that it might be earlier than they forecasted.

ECB’s Villeroy: We will maintain interest rates at 4% for a sufficiently long time

• Remarks by ECB policymaker, Francois Villeroy de Galhau

• “The medicine is beginning to work”
• Current ECB rates are at a good level, better to be patient now
• Once inflation is back to around 2%, rates can fall again

Other News

OECD raises global growth outlook for the year

• The latest projections by the OECD – September 2023

• 2023 global growth forecast at 3.0% (previously 2.7%), 2024 at 2.7% (previously 2.9%)
• 2023 US growth forecast at 2.2% (previously 1.6%), 2024 at 1.3% (previously 1.0%)
• 2023 China growth forecast at 5.1% (previously 5.4%), 2024 at 4.6% (previously 5.1%)
• 2023 Eurozone growth forecast at 0.6% (previously 0.9%), 2024 at 1.1% (previously 1.5%)
• 2023 Japan growth forecast at 1.8% (previously 1.3%), 2024 at 1.0% (previously 1.1%)
• 2023 UK growth forecast at 0.3% (unchanged), 2024 at 0.8% (previously 1.0%)

The contrast in the revisions highlight the diverging views in markets at the moment on the major economies. In other words, it is also in part why the US dollar continues to be in a rather strong position even as the Fed pauses. In judging which central bank can keep their word on higher rates for longer, it is all about how their respective economies hold up. So, there’s your clue.

BlackRock cut Chinese equities to neutral from overweight – China property sector a drag

Via the latest note from BlackRock Investment Institute, which covers a wise scope, this on China and Chinese shares. I’ve bolded the more encouraging bit:

• We cut emerging market (EM) stocks, including Chinese equities, to neutral from overweight as China’s property sector remains a drag even with growth showing signs of stabilizing

That’s about for the good China news in the note though.

More:

• China’s restart is losing steam and we don’t see valuations compelling enough to turn overweight
• see only limited policy stimulus from China
• Geopolitical fragmentation, like the strategic competition between the U.S. and China, is set to rewire global supply chains

RBA Sept meeting minutes: Considered a 25bp rate hike or on hold alternatives

Reserve Bank of Australia September 2023 meeting minutes.

• Considered raising rates by 25 bps or holding steady at the September meeting
• Some further tightening may be required should inflation prove more persistent than expected
• Case to hold was stronger, recent data did not materially alter the economic outlook
• Economy still appears to be on a narrow path by which inflation returns to target, employment grows
• Members recognize the value of allowing more time to see full effects from past tightening on the economy
• Policy moves will be guided by incoming data and assessment of risks
• Concerned about productivity growth not picking up as anticipated, services inflation remaining sticky
• Fuel prices rose sharply in August, could boost headline inflation in Q3
• Members noted that the labour market remains tight, but could be at a turning point
• Scheduled mortgage payments rose to a historical high of 9.7% of household income in July, set to increase further

Australian Weekly ANZ Roy Morgan Consumer Confidence survey 79.8 (vs. prior 77.6)

Highest for this since late April.

ANZ comments on the still dour result, looking for the bright side:

• While it remains at very low levels, there are signs of tempered optimism amongst households.
• Inflation expectations also fell to 4.9% – the lowest since Feb 2022

Japan PM to outline plans to allow overseas asset management firms’ entry to domestic market

Japanese PM Kishida will speak in New York on Thursday:

• Will outline Japan’s plans to facilitate overseas asset management firms’ entry to the domestic market
• Kishida will also announce further domestic asset management industry reforms

ANZ expect a subtle shift from the BOJ at this week’s meeting – to less dovish

ANZ Bank expects no change to the Bank of Japan’s (BoJ) monetary policy in the upcoming meeting but anticipates a subtle shift in the central bank’s language.

The BoJ is likely to drop its previous guidance of being open to additional easing measures.

Key Points:

• No Policy Change Expected: ANZ anticipates that the BoJ will maintain its existing monetary policy framework for the time being.
• Guidance Shift: Governor Ueda is likely to emphasize a data-driven approach, indicating a move away from the bank’s earlier ‘behind-the-curve’ strategy.

Cryptocurrency News

Monetary Authority of Singapore releases details of high-profile actions against errant crypto firms

• The Monetary Authority of Singapore issued its fourth enforcement report early on Tuesday, detailing actions taken against errant firms. 
• The report outlines MAS’ actions against the hedge fund Three Arrows Capital that invests in DeFi and cryptocurrency.
• MAS report reveals Singapore’s assistance in the US CFTC’s investigation into Binance and Phemex.

Singapore’s central bank, Monetary Authority of Singapore (MAS), has issued its fourth enforcement report, outlining actions taken against firms like Three Arrows Capital, which did not have a management framework to identify, monitor and address cryptocurrency and digital asset investment risks.

Injective price could rise 10% before shorts have a field day

• Injective price is bullish, with momentum indicators pointing to growing momentum
• INJ could rise 10% to the weekly FVG at $8.273, filling the inefficiency before a potential pullback.  
• A break and close above the CE at $8.407 would confirm an uptrend, likely reaching the $8.901 hurdle.

Injective (INJ) price is trading with a bullish bias, outperforming many cryptocurrencies, including Bitcoin (BTC). The rally could continue but it all depends on how bulls play their hand. Meanwhile, experts advise that now could be the ideal time to invest in altcoins with the countdown to the Bitcoin halving continues.

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/