Round up of today's market news *

North American News

U.S. Stock Market Ends Second Consecutive Day with Closing Lows

NASDAQ the biggest loser but S&P and Dow industrial average both close down over 1% as well

U.S. Stock Market Takes a Tumble with Second Straight Session of Closing at Lows: A Troubling Trend Emerges as All Three Major Indices Fall Below Their 100-Day Moving Averages, Harkening Back to January 19 When This Rare Phenomenon Last Occurred; NASDAQ Resumes Its Dance on the Edge of the 100-Day Line.

The final numbers are showing:

Dow industrial average fell -370.48 points or -1.08% at 34070.41
S&P fell -72.20 points or -1.64% at 4330.01
NASDAQ index fell -245.15 points or -1.82% at 13223.97

US initial jobless claims 201K versus 225K estimate

Initial jobless claims in continuing claims for the current week

Prior week 220K revised 221K
Initial employment claims 201K vs 225K estimate
4-week MA of initial jobless claims 217K vs 224.75K last week
Continuing claims 1.662M vs 1.695M estimate.
Prior week continuing claims 1.688M revised to 1.683M
4-week moving average of continuing claims 1.687M versus 1.6957M last week

Philadelphia Fed September manufacturing index -13.5 vs -0.7 estimate

Philadelphia area manufacturing data for September 2023

Prior month 12.0
Philly Fed business index -13.5 vs -0.7 estimate
Capital expenditures six-month forward 7.5 versus -4.5 last month
Employment -5.7 versus -6.0
Prices paid 25.7 versus 20.8 last month
prices received 14.8 versus 14.1 last month
New orders -10.2 versus 16.0 last month.
Shipments -3.2 versus 5.7 last month.
Unfilled orders -13.6 versus -4.8 last month
delivery times -14.9 versus -7.0 last month.
Inventories 8.9 versus -10.2 last month.
Average employee work 4.7 versus 6.3 last month

The six-month forward

business activity index came in 11.1 versus 3.9 last month
new orders 25.6 versus 18.2 last month
employment 6.5 versus 12.0 last month
shipments 30.5 versus 14.9 last month
prices paid 48.0 versus 53.0 last month
prices received 36.5 versus 40.6 last month
average work week -1.3 versus 8.3 last month

The detail summary from the Philadelphia Fed said:

Manufacturing activity in the region declined in September, reversing positive trends seen in August.
Key indicators like general activity, new orders, and shipments returned to negative territory.
- General activity index fell from 12.0 in August to -13.5 in September.
- New orders index dropped from 16.0 to -10.2.
- Shipments index declined 9 points to -3.2.
Employment continued to decline, with the index at -5.7.
- 19% of firms reported a decrease in employment, 14% reported an increase, and 67% reported no change.
Price indexes remained stable and near long-run averages.
- Prices paid diffusion index rose 5 points to 25.7.
- Current prices received index was little changed at 14.8.
Production and capacity utilization showed little change.
- Median current capacity utilization rate remained at 70 to 80%.
Labor supply was reported as a constraint by some firms, but 34% indicated it was not a constraint.
Supply chains were not a constraint for 46% of firms, up from 27% in June.
Future outlook:
- Most firms expect impacts of various factors to stay the same.
- 22% expect COVID-19 impacts to worsen, up from 0% in June.
- 24% expect worsening impacts from energy markets.
- Over one-fifth expect the impacts of financial capital to worsen.

US existing home sales for August 4.04M vs 4.10M estimate

Existing home sales for August 2023
Prior month 4.07M
existing home sales 4.04M versus 4.10M estimate
MoM -0.7%
Sales are down -15.3% year on year
1.1 million units of inventory which is -0.9% monthly and -14.1% year on year
3.3 month supply
Median price up 3.9% to $407,100. This is the 3rd consecutive month the median sales price brass 400,000
Properties typically remained on the market for 20 days in August, unchanged from July and up from 16 days in August 2022
72% of the homes sold in August were on the market for less than a month
First-time buyers are responsible for 29% of sales in August down from 30% in July, and identical to August 2022. It’s the lowest level of first-time buyers was 26% in November 2022
All cash sales accounted for 27% of transactions in August up from 26% in July and 24% in August 2022
Distressed sales – foreclosures and short sales represented 1% of sales in August unchanged from last month in the previous year
According to Freddie Mac the 30 year mortgage rate averaged 7.18% as of September 14 which is up from 7.122% from the prior weekend 6.02% one year ago

US leading indicators for August -0.4% versus -0.5% expected

US leading indicators

Prior month -0.4% revised to -0.3%
The month-to-month index has been negative since January 2022 (17 consecutive months)
Leading indicators for August -0.4% versus -0.5% expected

JP Morgan on FOMC – Even with more hawkish dots, still comfortable thinking hiking is over

The JP Morgan on Wednesday FOMC and Federal Reserve Chair Powell’s press conference:

FOMC went beyond just leaning into the soft-landing narrative—they are now forecasting only a trivial weakening in growth and labor markets next year and beyond.
Given this very rosy outlook it’s not surprising that the dots now project less easing in ’24 and ’25.
Chair Powell’s comments today, however, were less hawkish, as he stressed the conjectural nature of the dots. He also mentioned several times that the Fed will proceed “carefully” given how far they’ve come.
Even with the more hawkish dots we’re still comfortable thinking that the hiking cycle is over. We would be getting more concerned about the Committee walking into the policy mistake of overtightening if it weren’t for the fact that the more influential members are likely less hawkish than the median dot.

TD sees a US government shutdown as inevitable: when, not if

TD says that the question of a US government shutdown appears to be ‘when’ rather than ‘if’ at this stage.

If legislation on the House floor does not make ample headway by the end of the week, the most likely scenario will be a temporary shutdown.
Even if Congress manages to pass a last minute short-term continuing resolution, shutdown risk will remain on the table in Q4.
Estimates suggest a shutdown that lasts for one month could shave 0.2pp or slightly more from GDP growth, but such long government shutdowns have historically been rare. In other words, shutdowns don’t tend to matter until they do.
The production of economic statistics can also be delayed or canceled, as has occurred in the past, which could add additional volatility to markets.

TD is not just concerned with a shutdown as a negative for the economy:

The shutdown is one of the many headwinds the economy faces this fall. These include the potential drag from student loan repayments, higher interest rates and tighter financial conditions, and ongoing cooling in labour market dynamics.

Hedge fund CEO Jeffrey Gundlach says this is one of the best Fed decisions in a while

Gundlach is the founder of DoubleLine Capital, some remarks crossed the news wires in response to the Federal Open Market Committee (FOMC) decisions today.

This is one of the best Federal Reserve decisions in a while
Its the right thing to not raise rates
We have a lot of crosscurrents in the economy
Very prudent for the Fed to have a “wait and see” attitude
Probability for rate hikes is higher than before recent oil spike
The narrative is going to develop that there won’t be a hike in November
The unemployment rate is going to go higher
The economy could slow down fairly quickly
Treasury bonds are quite attractive at this moment
The next bond rally will not last
Think we are getting near the end of this 10-year rate rise
Quite likely there will be rate cuts in first half of next year
The equity market is really overvalued versus bond market
Could make a case to build a position in commodities

House Republicans lose rule vote on defense appropriations bill

The failures are spelling trouble and a potential shut down

The US House representatives lost the most recent rules vote on defense appropriations bill.House Speaker Kevin McCarthy is struggling to unite his Republican colleagues around a temporary funding bill to prevent a federal government shutdown at the end of the month.Despite ongoing negotiations, McCarthy is running out of options as the deadline approaches. Even if he manages to pass a conservative spending plan in the House, it is likely to be rejected by the Senate, where Democrats hold the majority.

McCarthy’s leadership is being questioned, especially after a group of GOP lawmakers from the House Freedom Caucus joined Democrats to block a defense bill which typically is a no-brainer. McCarthy is trying to push a stopgap bill that would cut many government services by 8% but spare defense and veterans accounts. However, conservative holdouts want these cuts to be in place for a full year.

Amid this deadlock, bipartisan groups in both the House and Senate are exploring alternative solutions to fund the government. President Joe Biden’s request for an additional $24 billion in aid for Ukraine is also hanging in the balance. The situation remains tense as lawmakers scramble to find a solution before the government runs out of money.

Goldman Sachs pushes back expectation of first Fed rate cut to Q4 2024

The firm previously saw that coming in Q2 2024 before the FOMC meeting yesterday

In other words, the Fed has done their job to convince markets that they can stick with a higher for longer narrative.

Commodities

Hawkish Fed and soaring yields weigh on Gold

Gold drops 0.56% to $1919.74 as the Fed’s decision to maintain and revise rates upward pressures gold prices.
US real yields hit a YTD high at 2.115%, which continues to be a significant headwind for Gold.
Mixed US economic data and hawkish stances from other central banks globally add to the bearish outlook for the precious metal.

Gold price slides for the third straight day against the US Dollar (USD), following the Federal Reserve’s hawkish hold that bolstered the Greenback. Hence, higher US Treasury bond yields rose, while gold traded at $1919.74, losing 0.56% after reaching a daily high of $1931.57.

WTI crude futures settle at $89.63

Down $0.03 or -0.03%

The price of WTI crude futures are settling at $89.63. That’s down $0.03 or -0.03%.

Technically looking at the hourly chart above, the price settlement is just above its 200-hour moving average at $89.57, and below its 100-hour moving average at $90.30. That puts the price in a neutral area. Buyers and sellers are battling it out between the moving average levels.It would take a move outside of the moving averages to tilt the bias more in favor of the buyers or sellers in the short term.

Goldman Sachs has raised its Brent oil forecast to US$100

Goldman Sachs has hiked its 12 month forecast for Brent crude from its previous $93 to $100.

Says that “most of the rally behind us”
“We believe that OPEC will be able to sustain Brent in an $80-to-$105 range in 2024 by leveraging robust Asia-centric global demand growth”
“OPEC is unlikely to push prices to extreme levels, which would destroy its long-term residual demand”
Deficit estimated at 2 mn barrels a day in Q3 2023 and of 1.1 mn barrels a day in Q4 2023
Global consumption at a record level

EU News

Major European indices close lower despite the steady central bank policy decisions

Swiss National Bank and Bank of England keep rates unchanged

The major European indices are closing the day lower with all but the UK FTSE 100 down over 1%. The final numbers are showing:

German DAX -1.33%
Frances CAC -1.59%
UK’s FTSE 100 -0.69%
Spain’s Ibex -1.0%
Italy’s FTSE MIB -1.74%

EU consumer confidence flash for September -17.8 versus -16.5 estimate

EU consumer confidence flash for September 2023

Prior month -16.0
EU consumer confidence flash for September -17.8 versus -16.5 estimate

France September business confidence 100 vs 99 prior

Latest data released by INSEE – 21 September 2023
Prior 99; revised to 100
Services confidence 102
Prior 100; revised to 102
Manufacturing confidence 99
Prior 96; revised to 97

BOE leaves bank rate unchanged at 5.25% vs 5.50% expected

The Bank of England announces its monetary policy decision for September 2023
Prior 5.25%
Bank rate vote 4-5 vs 8-1 expected (Bailey, Broadbent, Dhingra, Pill, Ramsden vote to hold)
Underlying growth in the 2H 2023 is likely to be weaker than expected
Labour market remains tight by historical standards
CPI inflation is expected to fall significantly further in the near-term
Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium-term
Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures

SNB leaves policy rate unchanged at 1.75% vs 2.00% expected

The Swiss central bank announces its monetary policy decision for September 2023
Prior 1.75%
Significant tightening of policy in recent quarters is countering remaining inflationary pressure
It cannot be ruled out that further tightening may become necessary
SNB will monitor inflation developments closely in the coming months
Will remain active in the foreign exchange market as necessary
Sees 2023 inflation at 2.2% (unchanged)
Sees 2024 inflation at 2.2% (unchanged)
Sees 2025 inflation at 1.9%

BOE’s Bailey: Inflation is falling and we expect it to fall further this year

BOE governor, Andrew Bailey, clarifies the central bank’s decision to hold today
That is welcome news
Previous rate hikes are working but inflation is still not where it needs to be
There is absolutely no room for complacency
Will be watching closely to see if further rate hikes will be needed
Will need to keep rates high enough and long enough to get the job done
Will do whatever is needed to get inflation back to normal
The jobs not done yet
Not predicting what next bank rate move will be
We have got a big job to do yet.
There is no premature celebration here on inflation falling
MPC has not had any discussion about cutting bank rate

SNB’s Jordan: Inflation battle is not over

Remarks by SNB chairman, Thomas Jordan

Given “comfortable” level of Swiss inflation, the best solution is to wait and see
Have to see what happens over the next 3 months
Clear focus is on price stability
We are not reacting to weakening in the economy, but to lower inflation

ECB’s Kazaks: Rise in energy prices does create upside risk to inflation

Remarks by ECB policymaker, Martins Kazaks

Recent energy price rise is structural, not a short-term transitory rise
Given current outlook, rate cut expectations around middle of 2024 are too early
Rates will need to remain restrictive for quite a while

ECBs Knot: Does not expect a rate hike at next policy meeting

ECBs Knot is now speaking
Does not expect a rate hike at next policy meeting
comfortable with current interest rates
ECB will stay alert to signals indicating inflation remains too high

Other News

ANZ analysts says China is showing ‘early signs’ of economic stabilization

An economist at ANZ (spoke in a CNBC interview) says that while China is showing ‘early signs’ of economic stabilization it’s still too early to tell if the economy will secure a full recovery by the end of the year.

In terms of economic momentum we are seeing some early signs of some sort of stabilization
We have recently revised up our 2023 GDP growth forecast to 5.1% from 4.9%

On China’s property sector:

Recent policy from demand side easings have exceeded our previous expectations
It creates some genuine demand at least in the upcoming traditional sales seasons in late September early October
That should help to restore part of the market sentiment
The longer term perspective it doesn’t mean that you know the structural issues existing in China’s property sector have been addressed yet specifically

China regulators probe hedge funds and brokerages amid public outcry on market weakness

Reuters reports on the matter, citing sources with direct knowledge of the probe

The crackdown continues in China as officials are obviously unhappy over how things are unfolding in domestic markets as of late. The report here highlights more unofficial measures taken up, one that I would label as off the books, as Beijing seeks to coerce market participants to side with how they want markets to behave.

It is said that the China Securities Regulatory Commission (CSRC) has checked with several major brokers on their short-selling activities in the past weeks.And that the trading strategies of their quant clients have also been probed. A source said that:

“They want to know the logic of the trading strategy, the source of the profit; under which situation you hold net long, or net short positions.. and the reason behind buy and sell orders.”

BOJ will not unwind easy policy at this week’s meeting – poll

All 26 economists of Reuters’ latest poll say that the BOJ will keep policy unchanged tomorrow

As for when the BOJ might end negative rates, the majority now sees that as coming some time in 2024. 13 of 25 economists are of that view, representing 52%, and that is up from a roughly 41% proportion in the August poll. As for yield curve control, 21 of 27 economists (~78%) say that it will happen by the end of next year.

On the latter, there are two standout calls with Barclays and Mizuho Securities arguing that the BOJ would scrap yield curve control in October. Barclays says that:

“YCC is increasingly becoming a matter of formality and will likely be abolished in October, when the BOJ publishes its quarterly outlook report.”

BOJ statement due Friday: “Ueda could strike a hawkish chord” – Westpac

Westpac on tomorrow’s BOJ and potential support for the Yen:

This week’s BoJ is not expected to produce any policy tweaks, but Ueda could nevertheless strike a hawkish chord, similar to the recent interview where he signalled openness to ending negative rates.
US Tsy Secretary Yellen’s comments that intervention would be “understandable” give BoJ officials even more leeway to push back on JPY weakness too.

Japan chief cabinet secretary Matsuno verbal yen intervention crossing the newswires

Matsuno’s remarks come after a big surge for USD/JPY following a hawkish hold from the FOMC on Wednesday.

Important for FX to move stably reflecting the fundamentals
Will respond appropriately to FX moves if necessary
Won’t rule out any options for response to FX moves
Expect BOJ to closely communicate with govt, continue to take appropriate monetary policy
Share mutual understanding with international authorities that excessive FX move undesirable

Reserve Bank of Australia’s ‘Bulletin’ discusses monitoring developments in wages

The Bulletin is published quarterly in March, June, September and December.

It contains articles on the economy and financial system from teams throughout the Reserve Bank of Australia.

If you are interested in the full article:

Monitoring developments in wages is important for assessing the inflation outlook, as labour costs are a major factor in firms’ pricing decisions

LNG: Australia industrial arbitrator says Chevron, Unions close to achieving agreements

Australia industrial arbitrator says:

Chevron, Unions are on the precipice of achieving historical first enterprise agreements for LNG facilities
Discussions have resulted in widespread agreement on the majority of provisions of the proposed enterprise agreements
A failure to settle all outstanding issues will result in those agreed provisions “simply evaporating”
Parties are required to advise the commission of their acceptance or rejection of recommendations by 9 a.m. Sydney time on friday
Makes recommendations on pay, working conditions for Chevron and unions to consider

New Zealand Q2 GDP rises more strongly than expected

Cryptocurrency News

Binance unintentionally causes Ethereum gas fees to soar 1,900% as hundreds of inactive wallets move ETH

Binance-connected wallet addresses recorded a spurt of transactions in the early hours of September 21
Etherscan data shows hundreds of formerly inactive wallets sent ETH to a single wallet tagged as Binance 14.
Ethereum gas fees skyrocketed from 15 to 300 Gwei as a consequence of the many streams of transactions
Simple P2P transactions recorded gas fees as high as $10 from the usual rate of around 40 cents.

Binance causes Ethereum gas fees to soar

With many transfers happening within a thin timeframe, Ethereum gas fees soared 1,900%, moving from 15 to around 300 Gwei. The same was reflected in simple Peer-to-Peer (P2P) transactions, which soared from the conventional 40 cents to around $10, data shows.

Arbitrum receives 2.5 million ARB funding request from Wormhole foundation

Wormhole Foundation submitted a funding proposal to the Arbitrum community, requesting 2.5 million ARB tokens.
The messaging protocol has proposed 8% annualized returns for users.
Wormhole’s objective is to attract 100 million USDC from other chains to Arbitrum.

Wormhole, a crypto and web3 messaging protocol, has submitted a proposal to encourage users to mint native USDC on the Arbitrum chain. The goal is to attract 100 million USDC and migrate it from other chains to Arbitrum.

The protocol has requested a maximum funding of 2.5 million ARB tokens and offers 8% annualized returns to users.This passive income opportunity is likely to attract investors.

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Round up of today’s market news

ByBilals Tech