North American News
Nasdaq Experiences Most Turbulent Trading Day Since February
- Dow Jones and S&P also close lower on the day
The NASDAQ index experienced a substantial decline, marking its most significant drop since February 21, with a 2.43% decrease. This ranks as the second-worst trading day of the year, following closely behind the 2.50% decline on February 21. While Microsoft posted an impressive gain of nearly 3% thanks to better-than-expected earnings and revenues, Alphabet faced a sharp decline despite surpassing its anticipated performance. Traders appeared unimpressed with Alphabet’s cloud revenue figures, leading to a substantial 9.50% drop in Alphabet shares. This decline stands as the company’s most severe one-day loss since March 2020.
A snapshot of the final numbers shows:
- Dow industrial average fell -105.45 points or -0.32% at 33035.92
- S&P index fell -60.94 points or -1.43% at 4186.79
- NASDAQ index fell -318.66 points or -2.43% at 12821.21
Meta beat on the top and bottom line:
- EPS at $$4.39 vs $3.63 est.
- Revenues came in at $34.15 vs expectations of $33.56 billion
- Forward guidance $36.5B to $40B vs $38 billion expected
Shares are up over 3% in after-hours trading. Meta closed down sharply. Shares ended the day down $-13.01 or -4.16% at $299.54. It’s 100 day moving average was just below the closing level at $299.05.
For IBM they beat on the top and bottom line:
- Earnings came in at $2.20 versus estimate of $2.13
- Revenues came in at $14.75 billion versus $14.73 billion estimate
Shares of IBM are up 1.4%
ServiceNow beat on the top and bottom line:
- EPS $2.92 versus $2.56 estimate
- Rev $2.29 billion versus $2.27 billion estimate
Shares of ServiceNow are trading up 6.57%
US treasury auctions off $52 billion of 5 year notes at a high yield of 4.899%
- WI level at the time of auction was 4.88% Tail of 1.9 basis points
The US treasury auctioned off the $52 billion a 5 year note at a high yield of 4.899%
- WI level at the time of auction was 4.88%
- Tail 1.9 basis points. The six-month average was -0.4 basis points
- Bid to cover came in at 2.36Xversus six-month average of 2.99X
- Dealers 19.4% versus six-month average of 12.3%
- Directs (a measure of domestic demand) 19.1% versus a 6 month average of 18.8%
- Indirects (a measure of international demand) 61.5% versus six-month average of 68.9%
The 5 year auction was horrible. The auction had a positive 1.9 basis point tail. The Bid to cover was well below the 6 month average. Domestic demand as measured by direct bidders was near the six-month average, but international demand was well below the 6 month average (and the prior of 71.1%).
Dealers take up the slack and were settled with 19.4% well above the six-month average of 12.3%.
Yields have moved up after the results
- 2-year yield 5.1 to 2% +5.2 basis points
- 10-year yields are trading at 4.950% up 11.1 basis points
- 30-year yield 5.090% up 12.8 basis points
Atlanta Fed GDPNow final estimate for 3Q growth comes in at 5.4%
- The advanced 3Q GDP will be released tomorrow
The Atlanta Fed GDPNow 3Q model estimates 3Q growth at 5.4%.That is unchanged from the previous estimate.The estimate is the final one ahead of the actual release scheduled tomorrow at 8:30 AM ET. Economists see growth lower at 4.5%.
In their own words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 5.4 percent on October 25, unchanged from October 18 after rounding.After recent releases from the US Census Bureau, the US Department of the Treasury’s Bureau of the Fiscal Service, and the National Association of Realtors, the nowcast of third-quarter real government spending growth decreased from 3.1 percent to 3.0 percent after rounding.
US new-home sales for September 0.759M vs 0.680M estimate
- US new home sales for September 2023
- Prior month 0.675M revised to 0.676M
- Sales of new single-family houses in September 2023:
- Seasonally adjusted annual rate: 759,000 vs 680,000 est.
- Increase of 12.3% from the revised August rate of 676,000
- Increase of 33.9% from September 2022 estimate of 567,000
- Sales Price for new houses sold in September 2023:
- Median sales price: $418,800
- Average sales price: $503,900
- For Sale Inventory and Months’ Supply:
- Seasonally adjusted estimate of new houses for sale at the end of September: 435,000
- Represents a supply of 6.9 months at the current sales rate
US MBA mortgage applications w.e. 20 October -1.0% vs -6.9% prior
- Latest data from the Mortgage Bankers Association for the week ending 20 October
- Prior -6.9%
- Market index 165.2 vs 166.9 prior
- Purchase index 127.0 vs 129.8 prior
- Refinance index 354.0 vs 347.6 prior
- 30-year mortgage rate 7.90% vs 7.70% prior
JPMorgan CEO Dimon said central banks got forecasts “100% dead wrong”
Dimon was speaking as part of a panel at the Future Investment Initiative summit in Riyadh, Saudi Arabia.
He said global central banks got financial forecasting “100% dead wrong” about 18 months ago. This means they should have some humility about the outlook for next year.
Looking ahead, Dimon is doubtful that central banks and governments around the globe are going to be able to manage the gyrations in economies from rising inflation and slowing global growth, saying:
- Fiscal spending is more than it’s ever been in peacetime
- There’s this omnipotent feeling that central banks and governments can manage through all this stuff
- is cautious about what will happen next year
- “I don’t think it makes a piece of difference whether rates go up 25 basis points or more.Whether the whole curve goes up 100 basis points, be prepared for it.I don’t know if it’s going to happen.”
WSJ’s Fed insider Timiraos says most think FOMC has made its last rate increase
Nick Timiraos of the Wall Street Journal:
Israel agrees to delay invasion of Gaza – report
- US will bring missile defenses to the region
The WSJ reports that Israel has agreed to a request from the US to delay a ground incursion into Gaza, according to unnamed officials. The delay is so the US can get more missile defenses in place.
The thinking is that a ground incursion will result in missile attacks on US forces in the region, highlighting 13 such attacks already.
“The Pentagon is scrambling to deploy nearly a dozen air-defense systems to the region, including for U.S. troops serving in Iraq, Syria, Kuwait, Jordan, Saudi Arabia and the United Arab Emirates, to protect them from missiles and rockets,” the report says.
Bank of Canada decision: Rates held unchanged at 5.00%, as expected
- Highlights of the Bank of Canada statement and the MPR on October 25, 2023
- Prior overnight rate was 5.00%
- BOC sees “clearer signs that monetary policy is moderating spending and relieving price pressures”
- “There is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures”
- BOC repeated that it ” is prepared to increase the policy interest rate further if needed”
- Sees inflation returning to 2% at the end of 2025 vs “mid-2025” previously
- The global economy is slowing and growth is forecast to moderate further as past increases in policy rates and the recent surge in global bond yields weigh on demand
- Weaker demand and higher borrowing costs are weighing on business investment
- The surge in Canada’s population is easing labour market pressures in some sectors while adding to housing demand and consumption
- The labour market remains on the tight side and wage pressures persist
- a range of indicators suggest that supply and demand in the economy are now approaching balance
- The BOC projects global GDP growth of 2.9% this year, 2.3% in 2024 and 2.6% in 2025, little changed from previously
- Growth in the euro area has slowed further
- Cuts 2023 growth forecast To 1.2% (prev 1.8%)Canadian economy to grow by 1.2% this year, 0.9% in 2024 and 2.5% in 2025
- 2024 to 0.9% vs 1.2% prior
- 2025 to 2.5% vs 2.4% prior
- 2023 inflation to 3.9% vs 3.7%
- 2024 inflation to 3.0% vs 2.5% prior
- 2025 inflation to 2.2% vs 2.1% prior
- BOC expects the Canadian economy to grow by 1.2% this year, 0.9% in 2024 and 2.5% in 2025
Macklem: Inflation is on a higher path than we expected
- Macklem says inflation risks have increased
- Demand pressures have eased more quickly than we forecast in July
- Overall inflation risks have increased since July
- We held policy rate steady because we want to allow mon pol time to cool economy
- Worried higher energy prices and persistence in underly inflation are slowing progress
- We’ve made a lot of progress but we’re not there yet
- We now expect oil prices to remain higher than we assumed in July
- We are seeing clear evidence that higher rates are working
- The exchange rate is part of how monetary policy works
- Normally large rate hikes boost the currency but because the US is also hiking, the currency has been relatively stable
- We don’t target the exchange rate but we take it into account
- We are seeing clear evidence that higher rates are working
- We left the door open to higher interest rates, if needed
- We need to see clear downward momentum in core inflation
- There could certainly be two or three quarters of negative growth
- A path to a soft landing in Canada is narrower vs USA
- Highlights the difference between US and Canadian mortgage markets
- Government spending doesn’t look like it’s been adding undue inflation pressure in the past year
- It’s easier to get inflation down if governments and central banks are moving int he same direction
- Now is not the time to discuss reductions in the overnight rate
- Says he wouldn’t use the term ‘stagflation’
- The risks that oil could go a lot higher have increased
Comments from BOC deputy Rogers in response to questions:
- Rogers: Relative to interest rates, we’re not seeing the drop in housing prices we’d expect
- Rogers: Canada continues to suffer from a lack of housing supply
- Rogers: We’re paying very close attention to the mortgage-renewal cycle
- Rogers: Will look more at housing in November Financial System Review
Bank of Canada decision highlights the economic calendar
- Bank of Canada expected to leave rates unchanged
Today’s Bank of Canada decision isn’t a completely foregone conclusion but it’s highly likely they leave rates unchanged at 5.00% at 10 am ET.The market is pricing in an 81% chance of no move from Macklem but the odds rise into next year and creep up to 60% for the March meeting.
Commodities
Silver retraces amidst sour market mood, strong US Dollar
- Silver prices drop and trades at around $22.85, down 0.33%.
- Silver remains downward biased after sliding below 200 and 50-day moving averages (DMAs).
- A breach of the 20-day Exponential Moving Average (DMA) at $22.20 could expose $22.00 and $20.77 levels.
Silver dropped in the mid-North American session on Wednesday as market sentiment turned negative, which usually underpins the grey metal. Nevertheless, an uptick in US Treasury bond yields and a strong US Dollar (USD), capped the white metal’s advance towards the $24.00 figure. At the time of writing, Silver exchanges hands at $22.85, down 0.33%.
After sliding below the 200 and 50-day moving averages (DMAs), silver remains downward biased, though shy of testing the 20-day Exponential Moving Average (DMA) at $22.20. A breach of the latter would expose $22.00, followed by the bottom of the Bollinger-Band at $20.77, but firstly, sellers must reclaim $21.00.
Gold price delivers wild spike though Middle East tensions keep safe-haven bid firm
- Gold price holds onto recovery propelled by a fall in long-term US Treasury yields.
- The US Dollar strengthened after S&P Global PMIs signaled an uptick in US business activity.
- Investors await the Q3 GDP and the Fed’s preferred inflation gauge, which could influence the Fed’s November policy decision.
Gold clings to gains around $1,980 on Wednesday, prompted by a decline in long-term US bond yields. The precious metal managed to recover swiftly as the near-term trend remains firmer amid the Israel-Palestine conflict.The risks of widening tensions in the region persist as the Israeli troops are preparing to enter Gaza.A ground assault by the Israeli army in Gaza could escalate the chances of Iran’s intervention in the ongoing conflict.
The appeal for the US Dollar improved significantly as S&P Global reported an uptick in US business activity in October despite higher interest rates and multi-year high US bond yields. Unlike Asian and European economies, the US economy seems to be handling higher borrowing costs effectively due to robust consumer spending, easing price pressures, and strong labor demand.
EIA weekly US oil inventories +1371K vs +239K expected
- Weekly US oil data for the week ending October 20
- Prior was -4491K
- Gasoline +156K vs -897K expected
- Distillates -1686K vs -1168K expected
- Refinery utilization -0.5% vs +0.4% expected
- Implied mogas demand 8.86m vs 8.94m prior
- Domestic production 13.2 mbpd vs 13.2 mbpd prior
EU News
Eurozone September M3 money supply -1.2% vs -1.7% y/y expected
- Latest data released by the ECB – 25 October 2023
- Prior -1.3%
Germany October Ifo business climate index 86.9 vs 85.9 expected
- Latest data released by Ifo – 25 October 2023
- Prior 85.7; revised to 85.8
- Current conditions 89.2 vs 88.5 expected
- Prior 88.7
- Expectations 84.7 vs 83.3 expected
- Prior 82.9; revised to 83.1
October Belgian business sentiment -16.8 vs -14.4 prior
- Business sentiment worsens
Belgian business sentiment is a leading indicator for the eurozone and this latest dip underscores some other signs of emerging weakness.
Switzerland October Credit Suisse investor sentiment -37.8 vs -27.6 prior
- Latest data released by Credit Suisse and CFA Society Switzerland – 25 October 2023
- Prior -27.6
IMF’s Georgieva: Inflation is still high
- Remarks by IMF managing director, Kristalina Georgieva, in Riyadh
- That requires interest rates to remain high, throwing more cold water on growth
- International cooperation truly a matter of the highest priority
- The costs of fragmentation are very significant
Other News
China will issue an additional 1 trillion yuan ($137 bn) in treasury bonds in Q4
Spoke about this yesterday:
Confirming now that 1 trillion yuan bond issuance was approved by the sixth session of the Standing Committee of the 14th National People’s Congress (NPC)
- this is China’s top legislature
- the bond issuance has been categorized as special treasury bonds
- half of the quota will be used this year and half in the new year
China has already issued over 7.5 trillion yuan in bonds in the first three quarters.The extra 1 trillion come on top of this. The amount is quite large in comparable terms
- in 2020 China issued 1 trillion yuan of special treasury bonds to fund stimulus spending and prop up the economy during the first year of the pandemic
- in 2022, special bond issuance totalled 750 billion yuan
China’s Xi visited the People’s Bank of China and FX regulator
Chinese Communist Party Chairman Xi along with Vice Premier He Lifeng and other government officials, visited the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) in Beijing on Tuesday.
Reuters carried the info, citing unnamed sources.
Adding ominously:
- The purpose of the visit was not immediately known.
- The PBOC and SAFE could not be immediately reached for comment outside of business hours.
This is the first visit to the PBOC by Xi since he took over as supreme leader in China more than a decade ago.
China vice finance minister says government debt level is within a reasonable range
- And new bond issuance will drive up domestic demand, further consolidate economic recovery
China’s Vice Finance Minister remarks crossing:
- Govt debt level is still within a reasonable range despite a modest rise in the budget deficit ratio this year
- The usage of new sovereign bonds can drive up domestic demand actively, and further consolidate economic recovery
- China will watch the macro economy and bond markets closely and ensure smooth bond issuance and avoid leaving the funds idle
Hong Kong to cut stamp duty on stock trading to 0.10% from 0.13%
- Hong Kong says the move is to strengthen its position as a centre for the offshore Chinese yuan
That’s another way to prop up the market I guess, after pretty much one-way traffic in the Hang Seng and Chinese stocks since the start of the year. There was a gap higher today with the open being 2.7% higher than yesterday’s close but the index has trimmed gains to 1.2% now before the announcement, which comes during the lunch break.Overall, the Hang Seng is still down roughly 13% on the year though.
Hong Kong to cut home purchase tax by 50%
Hong Kong will cut its home buying tax by half to 7.5%.
Info via local media.
Australian Q3 2023 Headline CPI +1.2% q/q (vs. 1.1% expected)
- Inflation data from Australia for the July – September quarter of 2023, along with September month CPI also
Higher than expected inflation data from Australia. Right across all three measures:
- headline
- trimmed mean
- weighted median
The topside surprise on the headline and core measures of inflation will put pressure on the Reserve Bank of Australia to hike in November.
The weighted median:
- 1.3% q/q vs. expected 1.0% and prior 1.0%
- 5.2% y/y vs. expected 5.0%, prior 5.5%
ANZ forecasts a 25bp RBA interest rate hike on November 7 (previous forecast was December)
ANZ were previously forecasting a 25bp hike in December but have dragged it forward to November.
- +25bp on November 7
- to take the cash rate to 4.35% from its current 4.1%
ANZ, in brief:
- Given the RBA’s hawkish rhetoric over the past two weeks and an uncomfortably high Q3 CPI (1.2% q/q for both headline and trimmed mean), we now expect the RBA to increase the cash rate by 25bp in November to 4.35%.
- Thereafter we expect a hawkish extended pause.
Commonwealth Bank of Australia forecast a 25bp RBA rate hike on November 7
Via CBA, their outlook for the Reserve Bank of Australia:
CPI stronger than expected – RBA to hike the cash rate in November
- The headline CPI rose by 1.2%/qtr in Q3 23 and the annual rate dipped to 5.4%.
- The RBA’s preferred measure of underlying inflation, the trimmed mean, increased by a solid 1.2%/qtr and the annual rate stepped down to 5.2 % (from 5.9% in Q2 23) .
- We expect the RBA to act on their hiking bias and raise the cash rate by 25bp at the November Board meeting to 4.35%
- The RBA has a hiking bias.And last night RBA Governor Bullock stated, “the Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation” (our emphasis in bold).
- We are not sure what constitutes a ‘material upward revision’ to the RBA’s inflation forecasts. But we consider the lift in underlying inflation over Q3 23 to be sufficiently strong for the RBA to act on their hiking bias at the upcoming Board meeting.
- The RBA tends to place more weight on underlying rather than headline inflation.And their preferred measure of underlying inflation is the trimmed mean.
The Bank of Japan’s own inflation measure has hit 2%. This is the BOJ target.
The Bank of Japan produce their own data on inflation rates in the country.
The key rate the Bank watches is the ‘Weighted Median’ y/y. It has hit 2% in the latest data, for September 2023, from 1.8% in August.
- this data point is used by the BOJ as a measure of broad inflation
- at 2% its hit a record high since comparable data became available in 2001
The Bank of Japan next meet on October 30 and 31, and will publish fresh inflation forecasts as part of the meeting.Its likely that the Bank will revise up its inflation forecasts.
Japan reportedly eyes one-year income, resident tax cuts from June next year
- Japanese media outlet, Sankei Shimbun, reports on the matter
This just rebuffs other ongoing reports on the matter, with the government said to be considering an income tax cut of ¥40,000 and cash handouts of ¥70,000 to low-income and elderly households. All of this is part of measures by the government to reduce the burden of inflation, not to mention a weakening currency over the last few years.
Cryptocurrency News
Ripple proponent John Deaton calls SEC an “absolute disgrace” for prosecuting XRP and LBRY
- XRP price is testing crucial support after rising by nearly 15% in the past week.
- Ripple and Uphold announced their partnership to enhance crypto liquidity capabilities on a global scale.
- Ripple proponent attorney John Deaton called the SEC an absolute disgrace for its prosecution of Ripple and LBRY.
XRP price is eyeing $0.60 as Ripple continues to receive support from its community.The SEC attacking the firm is still a matter of criticism, especially to Ripple enthusiasts who believe the regulator has let bad actors in the crypto space persist.
Daily Digest Market Movers: Ripple and Uphold to enhance cross-border payments
Ripple joined hands with global Web3 financial platform Uphold, according to an announcement on Tuesday.The new partnership will provide the payment processor with enhanced crypto liquidity capabilities, which are crucial in improving cross-border payment infrastructure.
Bitcoin consolidates gains after ETF ticker fiasco
- The cryptocurrency is up slightly today just above the $34,000 mark
It has been quite the week so far for Bitcoin, after it surged past the $30,000 mark and took more or less one shot to clip the $35,000 mark. Since then, gains have been capped but not after a bit of a fiasco with the ETF ticker on the DTCC website.
Price is at its highest since May last year and have also broken back above the confluence of the 100 and 200-week moving averages the last time it traded above both was in April last year.
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