Round up of today’s market news

North American News

Nasdaq Leads the Way as US Equities Secure Gains

• Nasdaq up 0.7%

Tech Stocks: A Short-Term Showstopper or a Long-Term Play? Today’s Remarkable Performance, Potentially Quarter-End Driven, Sheds Light on Their Durability. Tesla’s Delivery Setback Overcome with a Morning Rebound, while Other Tech Giants Garner Inflows and Command the Nasdaq Landscape, Suggesting Ongoing Quarterly Impact.

Closing changes:

• S&P 500 +0.1%
• Nasdaq Comp +0.7%
• Russell 2000 -1.9%
• DJIA -0.2%

Atlanta Fed GDPNow 3Q growth estimate remains unchanged at 4.9%

• GDP model still showing strong 3Q growth in the US

The Atlanta Fed GDPNow growth estimate for 3Q models 4.9%.That is unchanged from September 29. 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 October 2, unchanged from September 29 after rounding.After this morning’s data releases from the US Census Bureau and the Institute for Supply Management, slight declines in the model’s nowcasts of real personal consumption expenditures growth and real gross private domestic investment growth were offset by an increase in the model’s nowcast of real government expenditures growth.

US September ISM manufacturing PMI 49.0 vs 47.8 expected

• ISM manufacturing PMI for September 2023 highlights

• Prior report 47.6
• Prices paid vs 48.6 expected. Last month 48.4
• Employment vs 48.3 expected. Last month 48.5
• New orders vs 46.8 prior
• Inventories vs 44.0 prior
• Production vs 50.0 prior

Comments in the report:

• “In the evolving supply chain environment, customers are increasingly taking an active role in initiating new projects, looking for cost reduction opportunities and lead-time mitigation, with a growing emphasis on collaboration. Post-pandemic, customers have learned they need partners to navigate rough waters.” [Computer & Electronic Products]
• “We need to coordinate very closely with suppliers in order to yield a more cost-competitive offer. More back and forth is needed to reach a reasonable total price.” [Chemical Products]
• “Orders and production remain steady, and we are maintaining a healthy backlog. Continued inflation and wage adjustments continue to drive prices up, although we should get some relief from the markets stabilizing.” [Transportation Equipment]
• “Cost increases are now generally isolated to specific commodities rather than blanket increases due to ‘inflation.’ ” [Food, Beverage & Tobacco Products]
• “Markets remain soft.

US August construction spending +0.5% vs +0.5% expected

• US August construction spending
• Prior was +0.7% (Revised to +0.9%)

US final Sept S&P Global manufacturing PMI 49.8 vs 48.9 prelim

• US manufacturing data

• Prelim was 48.9
• Prior was 47.9
• New orders fell for the fifth month running in September, albeit at the slowest pace in this period
• Expectations for future output also rose, hitting the highest since April 2022
• Production returned to expansion

Chris Williamson, Chief Business Economist at S&PGlobal Market Intelligence, said:

“September saw a welcome near-stabilization of business conditions in manufacturing, but a further increase in price pressures is a concern on the inflation front. “

Output reversed some of the loss seen in August as higher employment and improved supply availability helped factories fulfil backlogs of orders. “Although the pace of production growth remains disappointingly subdued thanks to a further decline in new orders received during the month, notably from weak export markets, there are signs that the situation will improve as we head through to the end of the year.

“Manufacturers’ expectations of future output have jumped to their highest for nearly one and a half years, supply conditions continue to improve, and the rate of order book decline has moderated considerably in recent months, in part due to fewer producers and customers reporting deliberate cost-focused inventory reduction policies.

“Less encouraging was the news on the inflation outlook, as producers’ costs rose at the fastest rate for five months, largely on the back of higher oil prices. These increased costs are already feeding through to higher prices to customers, which will inevitably result in some renewed upward pressure on inflation.”

Jamie Dimon: The economy is ‘still ok’

• Dimon on Bloomberg TV
• SVB did a lot of things on the micro level in terms of customer service
• In every app and every database, you will be applying AI
• The consumer is still in good shape, they still have more money than before covid
• Credit is not deteriorating
• Worried about two storm clouds: 1) Fiscal spending is highest in peacetime ever; we’ve never had QT before and he’s not sure sure it will be insignificant 2) All the longer-term metrics around demographics and green transition are inflationary
• I’m not predicting, I’m just saying be prepared for it
• JPM can handle 2%, it can handle 7%
• We may have a soft landing, we may have a hard landing; the worst outcome would be stagflation

US warned China that more semiconductor export curbs are coming – report

• Reuters report

The Biden administration warned China that more computer chip-making export curbs are coming early this month. This would be an update around the one-year anniversary of the measures first unveiled on Oct 7, 2022.

The report said China was given advance notice as ‘part of a broader bid by the Biden administration to stabilize relations’. The Biden administration is hoping the Xi Jinping will attend an APEC summit in San Francisco in November.

Fed’s Bowman: It will ‘likely be appropriate’ to hike further

• Comments from the Fed’s Bowman
• It will likely be appropriate to raise rates further and hold them at restrictive level for some time
• Inflation remains too high
• Sees risk that high energy prices could reverse some of the recent progress on lowering inflation
• Frequency and scope of recent data revisions complicates task of projecting how economy will evolve
• Expects progress to be slow on inflation given the current level of monetary policy restraint
• Remains willing to support rate increase at a future meeting if data indicates progress on inflation has stalled or is too slow to return it to 2% in a timely way
• Regulators seem to be engaging in ‘heavy-handed’ supervision of banks

Feds Barr: We are at a point where we can proceed carefully on monetary policy

• FOMC member Barr speaking
• Fed is at a point where we can proceed carefully on monetary policy.
• Most important question is not whether an additional rate hike is needed this year.
• Most important question is how long we will need to hold rates at a sufficiently restrictive level.I expect it’ll take some time.
• Full effects of past tightenings are yet to come in the months ahead
• There has been a Lotta progress on inflation.
• Economic activity has been considerably more resilient than expected.
• Sees higher probability than previously for a soft landing.
• Labor market is tight, but supply and demand are coming into better balance.
• Baseline projections is for below potential GDP growth over next year and further softening of labor market.
• Monetary policy a blunt tool. Likely not appropriate to address specific financial stability threats.
• Supervisors expect banks to be ready and willing to use discount window
• There seems to be the right kind of slowing in housing
• Goods and housing services inflation is on the right path, downward
• The amount of credit tightening we are seeing is less than what I feared in March

Tesla Q3 deliveries miss estimate

• Tesla Q3 deliveries 435K compared to 457K consensus

• Deliveries 435,059 vs 466,140 in Q2
• Production 433,059 vs 479,700 in Q2

The vast majority of Tesla sales are the Model 3/Y.

“A sequential decline in volumes was caused by planned downtimes for factory upgrades, as discussed on the most recent earnings call. Our 2023 volume target of around 1.8 million vehicles remains unchanged,” the company said in the release.

Shares immediately fell about 2% and are down 3.25% in the premarket.

Wall Street estimates for Tesla deliveries were all over the place for this report as the company coaxed estimates lower in the past month. A few weeks ago, the consensus was at 473K units but that’s been pared down to 456.7K with some as low as 438K and as high as 511K.

Last quarter, Tesla delivered about 466K vehicles so this would be falling quarterly deliveries, which has happened to TSLA from time to time.

US government gets a 45 day funding reprieve

An update on US governance. The US Congress passed a last-minute stop gap bill to keep the government running for 45 days while disputing parties, and warring factions within them, try to hammer out a more enduring agreement.

• The House passed the band-aid spending bill on Saturday
• The Senate the bill later that same evening
• It was then signed into law by President Joe Biden late Saturday night

The bill allows the government to stay open for the next 45 days.

WSJ says Ackman has indicted he’d be happy to take X public – adds chances not great

The Wall Street Journal reported over the weekend on Bill Ackman’s firm, Pershing Square, having received regulatory signoff Friday for a novel investment vehicle whose purpose is to invest in a privately held company and take it public.

And adds:

• When asked by The Wall Street Journal if he would consider a transaction with X, the billionaire investor said “Absolutely.”

Note, this from the Journal:

• The chances of Ackman pulling off a deal for X aren’t great.
• Ackman says he has no idea if X is interested and would still need to determine whether or not a deal is doable.
• X had no comment.

Canada September S&P Global manufacturing PMI 47.5 vs 48.0 prior

• Canadian September manufacturing survey data

• Prior was 48.0
• Output, orders and employment all fell amid reports of softening market conditions
• Cost pressures showed signs of stabilisation following August’s upturn
• The decline in production was the steepest since August 2022

US manufacturing numbers are showing signs of bottoming and turning higher while Canadian data struggles. That suggests the IRA and CHIPS might be giving the US a leg up.

Commenting on the latest survey results, Paul Smith,Economics Director at S&P Global Market Intelligence said:

“In line with the global industrial downturn, the Canadian manufacturing sector continued to experience lacklustre performance during September. Output and new orders both fell to steeper degrees amid evidence of slow market demand. Price levels remain a problem for many clients, especially as Canadian manufacturers continued to hike their charges to a solid degree. “However, the weakening of cost inflation to a marginal pace may augur well for price developments further down the supply chain in the coming months. With job shedding again reported, these later developments addsupport to the Bank of Canada’s recent decision to holdits main policy rate unchanged.”

Commodities

Gold set to challenge $1,800 as investors sour on Gold

• Gold is extending declines on moody markets going risk-off.
• Interest rate concerns driving the price of bullion as Treasury yields climb.
• Gold spot prices set to challenge eight-month lows if downside resumes.

Gold is down $20 per ounce for Monday, declining to $1,830.00 on the charts as Gold continues its decline. Gold spot prices are set to close in the red for the sixth consecutive trading day, and gold has closed flat or bearish for nine of the last ten daily candles.

Gold remains significantly oversold on the charts as investors flock to safer havens in the face of rising interest rates and US Treasury yields consistently tapping into new highs. 

Gold stays in retreat, set for sixth straight day of losses

• The struggle continues for gold

There’s no relief for gold as the technical breakdown continues after the drop below $1,900 last week. The fall also took out support from the August lows and leaves a big air pocket between that and the February to March lows near the $1,800 mark.

Even as major central banks have moved to pause mode, the selling in bonds has been unrelenting and that has been a major bane for gold. And so, until bond yields turn the corner and head lower, only then will gold find any real relief and from a technical perspective, that might not come any time soon until we reach closer towards the $1,800 level.

Silver nosedives to near $21.50 as US Dollar strengthens

• Silver price dives perpendicularly to near $21.50 amid strength in the US Dollar.
• The US Dollar eyes more upside as the US Manufacturing PMI outperformed expectations but remained below the 50.0 threshold.
• Silver price delivers a breakdown of the Head and Shoulder pattern, which results in a vertical sell-off.

Silver faced an immense sell-off as the United States Institute of Supply Management (ISM) reported a higher-than-anticipated Manufacturing PMI for September. The economic data landed at 49.0, much higher than estimates and the former release of 47.7 and 47.6 respectively.

In spite of upbeat factory activities, the Manufacturing PMI remained below the 50.0 threshold for the 10th time in a row. The New Orders Index for the US factory also outperformed expectations and jumped to 49.2 from the August reading of 46.8.

WTI crude retreats below $89.00 on rising output amid economic slowdown concerns

• WTI crude drops 2.37% to $88.54 per barrel as profit-taking ensues and the US Dollar strengthens, driven by rising US Treasury bond yields.
• Concerns over economic slowdown, highlighted by weaker manufacturing data from China and Europe, pose potential risks to oil demand.
• Increased oil output from OPEC countries and potential supply increments from Turkey and Saudi Arabia add to the downward pressure on oil prices.

WTI, the US crude oil benchmark, sinks after hitting a daily high of $91.84 per barrel, though profit-taking and recent news of an increase in oil output weighed on oil prices. Therefore, WTI is trading at $88.54 a barrel, down 2.37%

EU News

European equity close: Declines in the 1% range

• Rough start to the week

US equities are looking better at the moment but it’s a rough look for Europe to start the new month:

Closing changes:

• Stoxx 600 -1.0%
• German DAX -1.0%
• Francis CAC -1.1%
• UK’s FTSE 100 -1.3%
• Spain’s IBEX -1.2%
• Italy’s FTSE MIB -1.5%

Eurozone August unemployment rate 6.4% vs 6.4% expected

• Latest data released by Eurostat – 2 October 2023
• Prior 6.4%; revised to 6.5%

Eurozone September final manufacturing PMI 43.4 vs 43.4 prelim

• Latest data released by HCOB – 2 October 2023
• Prior 43.5

The headline reading is a two-month as output also fell amid softer demand conditions. There was also a decline in employment, so just take note of that in case it starts to gather pace in the months ahead. HCOB notes that:

“The Output PMI was well under 50 for the entire third quarter, so we are feeling pretty certain that the recession in manufacturing continued during this period. We probably won’t see things picking up until we ring in the new year, but there are reasons to believe that the bottom of the hard-to-pin-down stocking cycle has been reached. According to the PMI survey, stocks of purchased goods have been diminishing since early this year, but the respective index has been hovering around 45 for the last five months. This marked the bottom during the slowdowns which occurred shortly before COVID-19 hit and 2012, before moving upwards again. Being a bit cautious with this, as we’re still seeing rapidly falling input purchasing, but the stocking cycle could soon recover, ready for a manufacturing bounce-back early next year.

“With the exception of the great recession in 2008/2009, output prices have never decreased at a pace faster than the current three-month average, and it’s similar with input prices, which fell almost as fast as when oil prices hit rock bottom in the late-90s and during the bursting of the dot-com bubble in 2001. Given how rare falls of this magnitude are, a rebound seems likely. Thus, we might just see goods deflation packing its bags earlier than we thought.

“In the race to the bottom, France and Germany are leading the way in the September PMIs. Meanwhile, Spain and Italy are pulling through somewhat less scathed. However, if you take the duration of the slowdown into account, considering official monthly production figures, Italy is the worst performer, with its manufacturing sector mired in a recession since the second half of 2022. Italy is followed by Germany, where a recession has started in the second quarter of this year. For France and Spain, we cannot confirm a technical recession yet. Given our forecast that the global manufacturing sector is bottoming out, these countries may be spared from a downturn lasting longer than two quarters.”

Germany September final manufacturing PMI 39.6 vs 39.8 prelim

• Latest data released by HCOB – 2 October 2023
• Prior 39.1

German manufacturing stays more subdued towards the end of Q3, as deteriorating demand conditions continue to weigh. This saw the sharpest decline in output since May 2020 but at least input costs are seen falling further. HCOB notes that:

“There are tentative signs that the bottom is in sight. For sure, the HCOB Manufacturing PMI of Germany is still signalling a quick slide downhill in terms of output. Nevertheless, we see glimmers of hope that the sector is starting to turn the corner. Take new orders for instance, they are on the decline, but easing up a bit. And it is a similar situation with export orders.

“In terms of new orders, history tells us an encouraging story. In past phases of weak growth or recessions, the new orders index stayed in contractionary territory for less than two years. Then, the index moved above 50, signalling growth again. Asof today, the new orders index has been below 50 for 18 months.Therefore, there is a decent shot that the order situation will start to improve by the start of next year.

“Suppliers’ delivery times continue to improve at a rather fast pace. This is a sign that demand is still deteriorating, but also that supply problems have been removed. The latter is an important prerequisite for growth to pick up again once demand conditions allow for it.

“Compared to previous recessionary phases, the job market is dancing to a different beat now. It’s like firms are just tiptoeing around job cuts. During the recessions at the start of the century, in 2008/2009 and during the eurozone debt crisis, jobs always took a nosedive. Today, demographics and the corresponding labour shortages, even in times of weak demand, are the obvious reasons why we are not seeing the job losses of times gone by. These factors change the character of this recession, which we assume to have started in the third quarter.

“Breaking it down by sector, the output drop is widespread. Consumer and investment goods production are dropping at faster rates, while the decline in intermediate goods output is easing up a touch. When it comes to jobs, the intermediate goods sector is looking the gloomiest. But in the world of consumer and investment goods, they’re holding the line, keeping jobs steady.”

France September final manufacturing PMI 44.2 vs 43.6 prelim

• Latest data released by HCOB – 2 October 2023
• Prior 46.0

That’s a slight improvement to the initial estimate but amid softer demand conditions, French manufacturing output was seen declining sharply once again. Of note, employment activity is also seen shrinking so that will be something to be wary about in the months ahead. HCOB notes that:

“The French manufacturing sector is still stuck in the mud as output dropped for the sixteenth month in a row. Weak demand was also signalled by a steep and accelerated decline in new orders. Output declined in all three segments – consumer, intermediate and capital goods – with the HCOB PMIs falling primarily in the last two segments.

“Seeing a decline in new orders, manufacturers are switching gears to work through their backlogs of work. In addition, the quantity and stocks of purchases further deteriorated in a sign that businesses are retrenching and preparing for a sustained contraction in the industry.

“Prices in the manufacturing sector are still rolling downhill. Although the pace at which prices fell slowed down compared to August, lower demand for input goods is seemingly pushing suppliers to be more competitive with the pricing of their goods. Output prices also declined further, reflecting a pass-through by manufacturers.

“Subsequently, it’s all gloom and doom for manufacturers when it comes to future production. The main reason for the pessimistic view is the risk of further falls in new orders. This can also be seen in the employment change. Companies laid off workers in response to falling activity, preparing for a further downturn. Fears of spill-over effects from downturns in other parts of the economy, such as the construction sector, are also compounding manufacturers’ misery.”

UK September final manufacturing PMI 44.3 vs 44.2 prelim

• Latest data released by Markit – 2 October 2023
• Prior 43.0

All five sub-indices (new orders, output, employment, stocks of purchases, supplier delivery times) showed declines in September as UK manufacturing activity stays in contraction territory. Demand conditions remain weak but at least that is helping to lead to a decrease in input costs. Markit notes that:

“September saw the manufacturing sector still mired in contraction territory, as weak conditions at home and abroad hit new order intakes and led to a further scaling back of production volumes. The cost-of-living crisis andrecent rapid rise in interest rates are taking their toll,according to producers, raising the possibility of thebroader UK economy slipping back into contraction duringthe second half of the year.

“The downturn is being felt throughout the manufacturing sector, with demand falling from both households and businesses. The resulting rise in caution at manufacturers is driving risk aversion and shifting their focus towards margin protection and cost control, highlighted by further cuts in employment, purchasing and inventories. These all point to companies battening down the hatches in expectation of stormy conditions ahead.

“There was slightly better news for producers on the price front, as a mix of lower costs and rising selling prices aided margin protection efforts. However, with oil prices on the rise, the environment may become less disinflationary in the coming months.”

UK September Nationwide house prices 0.0% vs -0.4% m/m expected

• Latest data released by Nationwide Building Society – 2 October 2023
• Prior -0.8%

That’s a better than expected reading but UK house price growth remains in the doldrums as higher rates continue to weigh. Nationwide notes that:

“Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, c.30% below the monthly average prevailing in 2019 before the pandemic struck. This relatively subdued picture is not surprising given the more challenging picture for housing affordability.

“However, investors have marked down their expectations for the future path of Bank Rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening. This in turn has put downward pressure on longer term interest rates which underpin fixed rate mortgage pricing. If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home.”

Spain September manufacturing PMI 47.7 vs 46.5 expected

• Latest data released by HCOB – 2 October 2023
• Prior 46.5

It’s an improvement as output and new orders fall at a slower pace but it still points to contraction in Spain’s manufacturing sector towards the end of Q3. HCOB notes that:

“Spanish manufacturing sector output took another dip in September, but it’s not dropping as fast this time. It is a nod to companies’ resilience, especially with their main export partners – France, Germany, and Italy – hitting some bumps.

“Demand for manufactured goods from Spain is still shrinking, but the jump in the new orders index looks like the drop in demand is moderating. The PMI numbers show this development is very much driven by orders from abroad. In this environment the decrease in backlog of work was little moved. All this fits with our perception that the global manufacturing downturn is about to find a bottom.

“Although the downturn has moderated somewhat it remains rather broad based. Intermediate goods took the biggest hit, while consumer goods production returned to modest growth. Investment goods output, however, remains in contractionary territory.

“Plugging in the fresh PMI figures into our model, our GDP nowcast delivers a somewhat rosier picture for the whole economy. An overall stagnation of GDP in the third quarter seems to be the most probable outcome with the data published so far. This contrasts with the moderate slump which we envisioned.

“We are seeing another drop in input prices, but it is a somewhat gentler slope this time around. This seems to be due to thespike in oil prices over the past few weeks.For companies it is a good sign that output prices were not cut too drastically, protecting their profit margins.”

Italy September manufacturing PMI 46.8 vs 45.7 expected

• Latest data released by HCOB – 2 October 2023
• Prior 45.4

The downturn in Italy’s manufacturing sector continues, albeit at a slower pace. HCOB notes that:

“The Italian industrial economy appears to be trapped in a deep recession with no clear way out.The HCOB PMI remains in contraction territory with an index value of 46.8, although the decline has slowed down compared to the previous month.

“The sub-indices provide little reason for hope. Output, new orders, quantity of purchases, and backlogs of work all shrank yet again. Even declining input prices and shorter suppliers’ delivery times must be interpreted as indicators of a demand weakness.

“The sole silver lining in September was the rise in factory employment. However, this can be seen more as a response tothe acute shortage of skilled workers in Italy’s labour force than as a harbinger of recovery.This is because new orders, both domestic and international, are shrinking, and even expectations for future output have fallen well below their long-term average, boding ill for the immediate outlook for Italy’s manufacturing sector.”

SNB total sight deposits w.e. 29 September CHF 476.3 bn vs CHF 475.1 bn prior

• Latest data released by the SNB – 2 October 2023
• Domestic sight deposits CHF 466.1 bn vs CHF 465.3 bn prior

Switzerland September manufacturing PMI 44.9 vs 40.5 expected

• Latest data released by Procure – 2 October 2023
• Prior 39.9

That’s a decent improvement in Swiss manufacturing activity as output and new orders recovered some ground. The details:

BOE’s Mann: I see more resilient domestic demand in the UK economy

• Comments from the Bank of England Mann
• I’m a hawk
• Says her inflation forecast is at the upper end of estimates

Other News

China September PMIs – all 4 in expansion now

China is on holiday all of this week but managed to publish the September PMIs over the weekend.

The official PMIs from the National Bureau of Statistics (NBS), for manufacturing and non-manufacturing:

• both improved from August,
• both beat expectations,
• both are now in expansion
• manufacturing returned to expansion for the first time in six months

For the privately surveyed Caixin PMIs:

• both dipped from August
• both missed expectations
• both remained in expansion

China is investigating whether founder of Evergrande attempted to transfer assets offshore

Last week the news hit that China had placed the Chairman of troubled property firm Evergrande ‘under police control’.

The Wall Street Journal now reports that China Evergrande’s billionaire chairman and founder Hui Ka Yan is being investigated:

• people with knowledge of Beijing’s decision-making said authorities are investigating whether Hui Ka Yan attempted to transfer assets offshore while the company was struggling to complete unfinished projects

The Journal is gated.

The piece goes on to discuss steps being taken, and not yet taken, to keep the property sector afloat:

• Ultimately, many say, it could require significant government intervention, much as the U.S. was forced to step in during the property-induced financial crisis in 2008.
• “The government should take more decisive steps to clean up the troubled property sector, allowing losses to be allocated among developers, banks and other stakeholders,” said George Magnus, former chief economist of UBS and an associate at Oxford University’s China center.

Australia data – Final September Manufacturing PMI 48.7 (flash was 48.2, prior 49.6)

S&P Global/Judo Bank Australia Manufacturing Purchasing Managers’ Index (PMI) for September 2023, the final reading has come in at sad-looking 48.7

• preliminary was 48.2, prior 49.6
• 48.7 is the seventh consecutive month in contraction

The key points made in the report:

• Output fell modestly amid marked reduction in new orders
• Staffing levels rose at the fastest rate since March
• Selling price inflation accelerated to a four-month high

Australian preliminary PMIs for September: Manufacturing 48.2 & Services 50.5

An improvement from August for Services but not so for Manufacturing

Australian private survey September CPI 0.0% m/m (prior 0.2%)

Melbourne Institute monthly inflation gauge flat m/m

• prior +0.2%

• +5.7% y/y

• prior +6.1%

For the trimmed mean, +0.1% m/m and +5.1% y/y

• prior +0.1% m/m and +5.7% y/y

Australian fund manager says there’s a 40% chance of an RBA rate hike in November/December

Dr. Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital Investors was speaking with local media, ABC.

Says there is a 40% chance of a 25bp interest rate increase from the Reserve Bank of Australia at the November or December meeting. Says this would be following inflation data and perhaps wages data. Says the RBA is concerned that if wages pick up too much it may push beyond levels consistent with its inflation target.

New Zealand data – August Building Permits -6.7% m/m (prior -5.4%)

Data for building consents in NZ for August 2023, down 6.7% m/m

• previous was -5.4%
• for the y/y -17%

Commentary from the statistics folks in the NZ government:

• “This figure continues the downward trend from the peak of 51,015 in the year ended May 2022,”
• “However, the number of new homes consented in the year ended August 2023 is still at a higher level than any 12-month period prior to 2021.”

RBNZ policy meeting this week – “Shadow Board” recommend cash rate hold at 5.5%

From the NZIER Shadow Board, in very brief:

• Most Shadow Board members recommended the Reserve Bank should hold the OCR at 5.50 percent in the upcoming October Monetary Policy Review.
  • The full impact of interest rate increases has yet to be transmitted to the broader New Zealand economy.
• Two members recommended a 25 basis-point hike in the OCR in October.
  • The view was that, with upside risks to inflation appearing more crystalised recently, the Reserve Bank should increase the OCR sooner rather than later if it still expects to start cutting the OCR later next year.

Japan final manufacturing PMI for September 48.5 (prior 49.6)

Commentary from the report on the disappointing result:

• The latest Jibun Bank PMI survey highlights a sustaineddownturn in manufacturing sector performance at the end of the third quarter. The headline reading was the weakest since February and pointed to a modest downturn in the health of the sector.
• Depressed economic conditions domestically and globally weighed heavily on the sector, as both output and new orders were scaled back further. The decline in the latter was notably sharp, and the strongest seen for seven months.
• Concerns remained over activity in the coming months as well, with manufacturers signalling the sharpest depletion in outstanding business for five months. Normally a bellwether for near-term activity, the sharper reduction was often attributed to the absence of new orders, thus firms redirected capacity to complete backlogs.
• Japanese manufacturers faced additional price pressuresaccording to the latest data, as the rate of input price inflationaccelerated for the second month running to a four-month high. There were often reports that higher raw material, oil, freight and energy prices had placed additional strain on firms, and that this was compounded by sustained weakness of the yen which pushed up prices for inputs from abroad.

BOJ announces unscheduled bond purchase operation to slow the rise in bond yields

• 10-year JGB yields were up 1 bps earlier today to 0.775%, its highest since September 2013

Japan finance minister Suzuki: Closely watching FX moves with strong sense of urgency

• Further verbal intervention by Japanese officials

When asked about the possibility of intervention, Suzuki declined to comment. But at this point, the less they say would be better. Too much jawboning and it would start to fall on deaf ears, which I suspect it already has.

Japan’s Matsuno says closely watching FX moves with a high sense of urgency

• Some more verbal intervention by Japanese officials

• Important for currencies to move in a stable manner reflecting fundamentals

Bank of Japan Q3 Tankan report – Firms expect the CPI still above 2% target in 5 years

The Bank of Japan Tankan report highlights that firms’ inflation expectations are still very high.

Tankan corporate price expectations survey:

• Japan firms expect consumer prices to rise 2.5% a year from now vs +2.6% in prev survey
• Japan firms expect consumer prices to rise an annual 2.2% 3 years from now vs +2.2% in prev survey
• Japan firms expect consumer prices to rise an annual 2.1% 5 years from now vs +2.1% in prev survey

Analysts comments seem to be along the lines that inflation expectations are moderating. And, if you check out the previous expectations they are. But they seem to be kidding the bigger pic, which is that expectations are still above target. Out for 5 years!!! How long is ‘transitory’, folks?

From the rest of the report, Headlines via Reuters:

• Sept big manufacturers index +9(expected: 6)
• Dec big manufacturers index seen at +10(: 5)
• Sept big non-manufacturers index +27(expected: 24)
• Dec big non-manufacturers index seen at +21(expected: 22)
• Sept small manufacturers index -5(expected: -4)
• Dec small manufacturers index seen at -2(expected: -4)
• Sept small non-manufacturers index +12(expected: 12)
• Dec small non-manufacturers index seen at +8(expected: 9)
• Japan all firms see dollar averaging 135.75 yen for fy2023/24
• Japan all firms see euro averaging 144.62 yen for fy2023/24
• Japan big manufacturers see dollar averaging 133.91 yen for fy2023/24
• Sept all firms employment index -33
• Sept all firms financial condition index +11 vs june +11
• Sept big manufacturers’ production capacity index +1 vs june +2
• Japan big manufacturers see fy2023/24 recurring profits -5.0%
• Japan big firms see fy2023/24 capex +13.6% (expected: 13.6%)
• Japan small firms see fy2023/24 capex +8.0% (expected: 4.4%)

Cryptocurrency News

Grayscale submits request to SEC to turn Ethereum Trust into an ETF

• Grayscale submitted an SEC filing to turn Ethereum trust worth around $4.9 billion into an ETF
• The market has seen the launch of the first ETH futures by VanEck on Monday. 
• The asset manager is already fighting the SEC in court over its Bitcoin Trust’s conversion into an ETF.

Grayscale is jumping on the Ethereum ETF hype that has gripped the market for a while now.Amidst the disheartening announcements made by the Securities and Exchange Commission (SEC) regarding spot Bitcoin ETFs, ETH Futures ETFs are observing a much more favorable environment. 

Grayscale eyes Ethereum ETF

Grayscale announced on Monday that the asset management firm filed an application with the SEC to convert the Grayscale Ethereum Trust (ETHE) into a spot Ethereum ETF.The filing came in following the positive reaction noted by the regulatory body over the past couple of days concerning the barrage of Ethereum Futures exchange-traded funds (ETF) filings.

Crypto market stalls as ethereum futures ETF debut flounders

• Just 17.4K shares trade on ethereum future ETF

There was some crypto hype late last week the spilled over into early trading today with some impressive gains. The driver was likely the launch of an ether futures-backed ETF launching today from VanEck under the symbol EFUT along with a handful of others.

Let’s just say that it’s not going as hoped. Volumes so far have been 17,000 shares on the EFUT release, or about $290,000. The total volume of all the new crypto futures ETFs debuting today and it was less than $2 million.

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