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North American News

US Stocks Extend Winning Streak with Back-to-Back Gains

  • Lower close for the month though

The major US stock indices closed higher for the 2nd consecutive day this week, but the month of October was bleak for the major indices.

The final numbers for the day are showing:

  • Dow industrial average up 123.78 points or 0.38% at 33052.75
  • S&P index up 26.98 points or 0.65% at 4193.81
  • NASDAQ index up 61.74 points or 0.48% at 12851.23

For the month of October, the major indices all closed lower. It was the 3rd consecutive decline for the 3 major indices:

  • Dow industrial average -1.36%. The Dow has fallen 7.05% over the last 3 months
  • S&P index -2.20%.The S&P index has fallen 8.61% over the last 3 months.
  • NASDAQ index of -2.78%.The NASDAQ index has fallen -10.42% over the last 3 months

For the calendar year:

  • Dow Industrial Average is down -0.28%
  • S&P index is up 9.23%
  • NASDAQ index is up 22.78%

US employment cost Index at for Q3 1.1% versus 1.0% expectation

  • US employment cost index for the 3Q of 2023
  • Prior quarter 1.0%
  • Employment cost index 1.1% versus 1.0% expected
  • Wages 1.2% versus 1.0% last quarter
  • Employment benefits 0.9% versus 0.9% last quarter

Looking at the chart above, prior to Covid, the QoQ increases were below the 1.0% level. Since 2021, most of the increases have been above 1%.

Other details:

12-Month Period Ending in September 2023:

  • Compensation costs for civilian workers increased by 4.3%.
  • Wages and salaries increased by 4.6%, down from 5.1% in the previous year.
  • Benefit costs rose by 4.1%, compared to a 4.9% increase in the previous year.

Private Industry Workers:

  • Compensation costs increased by 4.3% over the year.
  • Wages and salaries rose by 4.5%.
  • Benefit costs increased by 3.9% for the 12-month period ending in September 2023.
  • Inflation-adjusted compensation costs in the private sector increased by 0.6%.

Private Industry Occupational Groups:

  • Compensation cost increases ranged from 3.9% for production, transportation, and material moving occupations to 4.5% for service occupations.

Industry Supersectors:

  • Compensation cost increases ranged from 3.7% for manufacturing to 4.9% for education and health services and other services, except public administration.

State and Local Government Workers:

  • Compensation costs increased by 4.8% for the 12-month period ending in September 2023.
  • Wages and salaries rose by 4.8%.
  • Benefit costs increased by 4.7% over the year.

US Case-Shiller August 20-city house price index +1.0% y/y vs +1.6% expected

  • House price data from S&P CoreLogic Case-Shiller
  • Prior was +0.1% y/y
  • m/m price rise vs +0.7% expected
  • Prior m/m reading was +0.9%

National monthly home price data from the FHFA:

  • Prices +5.6% y/y vs +4.6% prior
  • Prices m/m +0.6% vs +0.8% prior

US October consumer confidence 102.6 vs 100.0 expected

  • US consumer confidence from The Conference Board
  • Prior was 103.0 (revised to 104.3)

Details:

  • Present situation index 143.1 vs 147.1 prior
  • Expectations index 75.6 vs 73.7 prior
  • 1 year Inflation 5.9% vs 5.8% prior
  • Jobs hard-to-get 13.1 vs 13.6 prior

“Consumer confidence fell again in October 2023, marking three consecutive months of decline,” said Dana Peterson, Chief Economist at The Conference Board.“October’s retreat reflected pullbacks in both the Present Situation and Expectations Index. Write-in responses showed that consumers continued to be preoccupied with rising prices in general, and for grocery and gasoline prices in particular. Consumers also expressed concerns about the political situation and higher interest rates. Worries around war/conflicts also rose, amid the recent turmoil in the Middle East. The decline in consumer confidence was evident across householders aged 35 and up, and not limited to any one income group.”

Dallas Fed service sector outlook -18.2 vs -8.6 prior

  • Dallas Fed services survey
  • This is the lowest since December 2022 and just above the post-covid lows

Fed Preview: Forecasts from 14 major banks, preserving the option of hiking once more

The Fed is set to leave rates unchanged for a second consecutive meeting but Fed Chair Jerome Powell is expected to keep door open to more hikes. Update macro forecasts and Dot Plots will not come until the December meeting.

Danske Bank

We expect the Fed to remain on hold in the November meeting, in line with consensus and market pricing.As financial conditions have tightened significantly, we doubt the Fed will opt for hikes at a later stage either.Rise in term premium suggests higher yields are driven by other factors than the Fed’s forward guidance, which could spark more cautious tone from Powell. 

ANZ

We expect the FOMC to leave rates on hold and that its attention in coming months will evolve to focus on how long rates will need to stay at peak levels.We are of the view that recent developments in core inflation and the labour market support our analysis that rates have peaked.However, the risk that growth momentum remains strong in coming months is a wild card that needs to be acknowledged. We therefore remain focused on incoming economic data.

Commerzbank

The Fed is likely to leave the target range for the fed funds at 5.25%-5.50%.Only if the recent very high pace of growth does not weaken is a further rate hike to be expected – but not before December at the earliest.

Nordea

Fed meeting will likely be a rather uneventful event.The Fed will keep rates unchanged at 5.25% to 5.5%.With no new forecasts, Powell’s press conference will be most important for investors.We don’t think the Fed has been convinced that a new hike is needed still, even with strong macro data from the US over the last week.That does not mean that rate cuts are on the horizon either.The Fed will still put emphasis on upside risks for inflation and for the need for high rates for longer.

ING

We don’t expect any change to policy rates after the recent spike in Treasury yields prompted a tightening of financial conditions throughout the economy.The market seems to be doing the heavy lifting, so there isn’t any need for the Fed to do much more – despite growth and the jobs market remaining hot and inflation still well above target.Fed Chair Jerome Powell has also acknowledged that long and variable lags between the implementation of rate hikes and the real-world impact point to the possibility that the full impact of policy tightening could still be yet to take full effect.

Deutsche Bank

We expect the Fed to stay on hold and see future hikes as a function of financial conditions and the path of the economy. While our baseline is for rates to stay at 5.3% through year-end, we see an increasing risk of a hike in December or Q1.

TDS

The FOMC is widely expected to extend a pause to rate increases again, keeping the Fed funds target range unchanged at 5.25%-5.50% for a second consecutive meeting.We expect the Fed to maintain its broadly hawkish policy tilt as it stays consistent with its signaling of an additional rate increase through the dot plot. However, the Fed will reiterate that it aims to ‘proceed carefully’ as it formulates the next policy steps.

Rabobank

We expect the FOMC to remain on hold, stress its data dependence and intention to proceed carefully. During the press conference, we expect Powell to keep the door open to a rate hike in December. However, for the remainder of the year, we expect the bond market to do the Fed’s work, making further policy rate hikes redundant. Meanwhile, the focus of the FOMC may be shifting from how high to raise the policy rate to how long to hold the policy rate at restrictive levels.

NBF

The FOMC is poised to leave the target range for the federal funds rate unchanged at 5.25% to 5.50%.Chair Powell has said that policymakers can proceed carefully ‘given the uncertainties and risks, and how far we have come’.Moreover, a number of FOMC participants have suggested the run-up in longer-term interest rates might substitute for additional policy rate increases.

RBC Economics

The Fed is widely expected to hold interest rates unchanged again in October after skipping a hike in September.US economic growth numbers have remained exceptionally resilient, but inflation pressures moderated over the summer and that is allowing the Fed room to be patient as they wait for already high interest rates to slow growth with a lag.

SocGen

Inflation has fallen back from its highs, but core inflation of just under 4% remains well above target.We see a need for the Fed to remain on hold.We see the prevailing FFR of 5.25-5.50% as appropriately restrictive given current inflation and growth, but the rate becomes increasingly restrictive if inflation subsides as expected. Fed officials have signalled they want additional information on how the economy has responded to yield increases before taking additional steps.We expect that by early next year, inflation pressures can subside and growth moderate to paces that allow the Fed to stay on hold.Rate cuts are our view of the next fed funds rate change, but employment weakness, which we expect near mid-2024, needs to be the trigger for such action.

BMO

We look for no change in Fed policy.A prolonged pause could be unfolding, but it’s still premature to rule out another rate hike on December 13 or at the end of January.  We’re expecting the economic indicators to weaken meaningfully in the month or two ahead, sufficient to forestall further rate rises.Amid the lagged impact of policy rate hikes along with dwindling excess savings and tightening credit conditions, we reckon the headwinds from higher bond yields, the resumption of student loan payments and the autoworkers’ strike should do the trick. Then there are the risks posed by a potential government shutdown (after November 17) and a potential spike in oil prices owing to geopolitical developments. However, our expectation for the indicators could turn out to be incorrect; and if it is, so too will be our call for the current fed funds target range (5.25%-to-5.50%) marking the rate apex this tightening cycle.

Citi

We expect the Fed not to hike. However, given strong economic data and stronger September core CPI and PCE prints the Fed and Chair Powell will likely want to keep optionality in their language. It would also not be surprising were the Fed to add some language on determining how long to keep policy rates at restrictive levels. Chair Powell will once again try to walk a tightrope during the press conference emphasizing that at this juncture the FOMC ought to move cautiously in coming meetings. He will likely explicitly link caution in proceeding with rate hikes to the rapid rise of longer-term yields, as he did in a recent speech. He may also recognize that the resiliency of the economy so far and remaining upside risks to inflation likely imply that the policy rate needs to stay elevated for some time.

Wells Fargo

We expect the FOMC to leave the target range for the FFR unchanged at 5.25%-5.50%.While inflation is moving back toward the FOMC’s 2% target, there is further progress to be made.We believe the FOMC will want to keep its options open for further tightening, and thus think the post-meeting statement will maintain the language that signals some additional policy tightening may be appropriate.We continue to anticipate the terminal rate of this cycle has been reached, though we acknowledge it is possible the FOMC will hike rates an additional 25 bps before the end of the year.

New York Federal Reserve ‘core’ inflation data 2.9% in September (prior 2.6%)

The New York branch of the Federal Reserve released its Multivariate Core Trend (MCT) inflation measure on Tuesday ICYMI.

The main points highlighted by the Fed:

  • Multivariate Core Trend (MCT) inflation was 2.9 percent in September, a 0.3 percentage point increase from August (which was revised up from 2.5 percent). The 68 percent probability band is (2.4, 3.3).
  • Services ex-housing accounted for 0.54 percentage point (ppt) of the increase in the MCT estimate relative to its pre-pandemic average, while housing accounted for 0.50 ppt. Core goods had the smallest contribution, 0.03 ppt.
  • A large part of the persistence in housing and services ex-housing is explained by the sector-specific component of the trend.

Morgan Stanley analyst says the chance of a Q4 S&P 500 rally has fallen considerably

In a fresh note to open the week, Wilson maintained he sees downside, not upside for the US benchmark index:

  • likelihood of a Q4 rally has “fallen considerably” over the past month … “Narrowing breadth, cautious factor leadership, falling earnings revisions and fading consumer and business confidence tell a different story than the consensus, which sees a rally into year-end”
  • initial bullish sentiments waned in September
  • but did pick up again in October on expectations of better third-quarter earnings and seasonal strength into the year-end

JP Morgan are looking at 3 factors that’ll trigger an S&P500 short squeeze

Would have been better to have had this prior to the open on Monday, but anyway:

JP Morgan’s 3 factors:

  • evidence that consumer spending isn’t slowing down too a great degree
  • an earnings season that comes in relatively strong
  • the FOMC clearly saying its on hold

Canada August GDP 0.0% vs +0.1% expected

  • Canada August 2023 GDP and the advanced report for September
  • July advanced reading was 0.0%
  • Prior was 0.0%
  • September advance GDP 0.0%
  • Services +0.1%
  • Goods -0.2%
  • Wholesale trade +2.3%
  • The mining, quarrying, and oil and gas extraction sector rose 1.2%
  • Manufacturing -0.6%
  • Accommodation and food services declined 1.8%
  • The transportation and warehousing sector increased 0.8%
  • Retail trade contracted 0.7%

Canadian GDP is a clear sign that rates will need to come down next year – CIBC

  • Canadian GDP was flat in Q3

Today’s advanced reading on GDP suggested a flat reading for Q3 following a slight contraction in Q2.That’s much softer than the Bank of Canada’s forecast for +0.8% GDP growth

Goods-producing industries have been in decline for five consecutive months, with agriculture notably down due to dry conditions in Western Canada​ and CIBC warns that could understate strength in the economy.

Overall though, they think the Bank of Canada is done hiking and will increasingly tilt towards rate cuts.

While Q3’s weakness can be partly chalked up to the decline in agricultural production and fire/strike disruptions early in the quarter, the underlying trend of consumer spending also appears very weak with retail sales declining and the post-pandemic recovery in accommodation and food services stalling. The fact that this weakness is happening at a time when population growth has been so strong, and before the majority of homeowners have yet to be exposed to higher interest rates, is a clear signal that rates will have to come down next year to avoid an even worse outcome (we currently expect the first move lower in Q2 next year).


Commodities

Silver retreats below $23.00 as double-top looms

  • Silver is facing a potential double-top formation on the daily chart suggests further retracement is possible.
  • Key support levels include the 50-day moving average (DMA) at $22.93 and the 20-day DMA at $22.45.
  • On the upside, reclaiming $23.00 would bring the 200-DMA at $23.28 into focus, followed by the September 23 daily high at $23.77.

Silver price trips down and aims below the $23.00 mark, which was briefly visited by the grey metal and capped by a strong recovery from the Greenback. The white metal is trading at $22.86, down 1.82%.

A double-top in the daily chart is forming, suggesting that silver could retrace further, past the latest cycle low of $22.45, the October 26 low. However, on its way to challenging the latter, Silver must break key technical support levels like the 50-day moving average (DMA) at 422.93, and the 20-day moving average (DMA) at $22.45. Once those levels are cleared, Silver could shift from a neutral to a downward bias.

Gold climbs above $2000 as more sovereign buying seen

  • Sovereign purchases are up 14% year-over-year, led by China

The US dollar is strong today but that hasn’t halted the advance in gold. It’s up $9.50 to $2005. Traders are eyeing last week’s high of $2009 as short-term resistance.

The World Gold Council today reported that central banks bought 800 tonnes in the first nine months of the year, up 14% y/y. Of that, 181 tonnes went to China. The rise this year comes despite a record high in buying the year before at 1081 tonnes.

It’s been rumored that China’s central bank and its people have been big buyers of gold all year.
The recent late-September dip in gold prices coincided with a Chinese holiday, adding to that belief.

Other central banks that have been buying include Poland at 57 tonnes and Turkey with 39 tonnes.

The speculation is that China and Russia are buying even more than is officially reported.

November is traditionally the seasonal low in gold followed by three months of buying into the next round of Chinese holidays. Next year, a dovish turn from the Fed and a fall in the US dollar could breathe further life into gold, which is at or near record highs against most other currencies.

WTI crude oil futures settle at $81.02

  • Down -$1.29 or -1.57%

The price of WTI crude futures is settling in at $81.02. That is down -$1.29 or -1.57% in the lowest price since August 30.

Looking at the daily chart, the move lower has now taken the price below its 100-day moving average at $81.28. The next target comes in at the 50% midpoint of the move up from the early May low. That level comes in at $79.30. Below that is the 200-day moving average at $78.14.

Oil – private survey of inventory shows headline crude build near what was expected

  • API
  • Crude +1.347 million (+1.601 mil exp.)
  • Gasoline -357,000
  • Distillates -2.484 million
  • Cushing +375,000

Oil edges higher, eyes on Venezuela after opposition primary suspended

  • Venezuela granted sanctions relief on oil in exchange for fair election

Earlier this month, the US granted Venezuela sanctions relief in exchange for holding fair elections this year.

That plan appears to be unravelling quickly as yesterday Venezuela’s electoral court said it is suspending opposition primaries days after President Nicolas Maduro called the vote a fraud.

To be fair, the 93% primary vote for María Corina Machado is suspiciously high on 2.5 million votes and the voting sheets have already been destroyed.

Given the actions from Maduro, I don’t see how the US sanctions can be removed for long, especially with such a flagrant violation of promises.WTI crude oil is up 61-cents to $82.92 today.

Brent crude – World Bank still warning that oil prices could reach US$150 a barrel

The World Bank is still cautioning on oil prices, saying that even a small disruption to oil supply could take around 2 million barrels a day out the market.

Snippets from the report:

  • in a worse case scenario is a situation similar to the oil crisis of the 1970s, which would could push oil prices up to between $140 and $157 a barrel (In October 1973, Arab oil-producing nations cut exports to the US and other countries that supported Israel in the Yom Kippur war.Oil prices soared.)
  • “The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s – Russia’s war with Ukraine,”
  • “That had disruptive effects on the global economy that persist to this day.”
  • the global economy was in a better position to withstand a supply shock than it had been during previous conflicts in the Middle East
  • the global economy is still recovering from the energy price spikes seen last year

EU News

Eurozone October preliminary CPI +2.9% vs +3.1% y/y expected

  • Latest data released by Eurostat – 31 October 2023
  • Prior +4.3%
  • Core CPI +4.2% vs +4.2% y/y expected
  • Prior +4.5%

Eurozone Q3 preliminary GDP -0.1% vs 0.0% q/q expected

  • Latest data released by Eurostat – 31 October 2023
  • Prior +0.1%

Germany September import price index +1.6% vs +0.7% m/m expected

  • Latest data released by Destatis – 31 October 2023
  • Prior +0.4%

The monthly increase is largely to do with higher energy prices. If you strip that out, import prices were only seen up 0.3% on the month instead. This comes as natural gas prices rose by a whopping 12.3% on the month in September.

Germany September retail sales -0.8% vs +0.5% m/m expected

  • Latest data released by Destatis – 31 October 2023
  • Prior -1.2%

France October preliminary CPI +4.0% vs +4.0% y/y expected

  • Latest data released by INSEE – 31 October 2023
  • Prior +4.9%
  • HICP +4.5% vs +4.5% y/y expected
  • Prior +5.7%

France Q3 preliminary GDP +0.1% vs +0.1% q/q expected

  • Latest data released by INSEE – 31 October 2023
  • Prior +0.5%; revised to +0.6%

Looking at the details, domestic demand (+0.7%) contributed positively but was offset by inventory changes (-0.3%) and net foreign trade (-0.3%) during the quarter.

Italy Q3 preliminary GDP 0.0% vs +0.1% q/q expected

  • Latest data released by Istat – 31 October 2023
  • Prior -0.4%

BRC data shows UK shop price inflation at lowest since August 2022

British Retail Consortium data for October 2023:

  • prices in UK store chains rose at the slowest pace in more than a yea
  • annual shop price inflation dropped to 5.2% from 6.2% in September, its weakest since August 2022
  • Food price inflation y/y fell for the sixth month in a row
  • Food prices rose slightly in month-on-month terms after the first such fall in over two years in September
  • Non-food inflation eased to an annual 3.4% from 4.4%

Lloyds Bank Business confidence measure hits second-highest level of 2023: 39% (prior 36%)

Lloyds Bank Business Barometer data for October 2023:

  • business confidence grew in October to 39% after a drop in September at 36%
  • October rose to its second-highest level of 2023
  • “However, our data shows that firms are still safeguarding their profit margins in response to the possibility of interest rates remaining high, wage increase pressures, and the prospect of higher energy prices again this winter,”
  • Pricing expectations rose for a third month in a row to hit a new high for 2023 with 62% of firms planning to increase their prices and only 3% planning to reduce them.
  • Companies expecting to raise their staffing levels rose by three points to 48% compared with 16% that planned job cuts.
  • Pay increase expectations remained high.

ECB’s Nagel: Rates must be sufficiently high for sufficiently long

  • Comments from the Bundesbank President
  • Inflation has now fallen significantly but it is still too high
  • We must not let up too soon, rates must be sufficiently high for long time
  • It is not yet possible to say if rates have reached their peak
  • There are several upside risks to inflation
  • Inflation has proven stubborn

ECB’s Kazaks: No need to discuss rate cuts now

  • Comments from Kazaks
  • The risk of inflation persists
  • Door should always be open to hike if needed
  • Dramatic turnaround in economy needed for rate cuts

ECB’s Villeroy: The latest data shows France has clearly passed inflation peak

  • Comments from Villeroy
  • Economy fully justifies end of rate hikes and future must be guided towards patience

ECB’s Stournaras said would consider a rate cut in mid-2024 if inflation falls below 3%

  • Personally,I would consider cutting interest rates if inflation falls permanently and sustainably below the three percent threshold in mid-2024.
  • Says he hasn’t discussed cutting rates next year with colleagues
  • We are now deep in restrictive territory, no matter which perspective you look at it from
  • The economy is much weaker than we thought in September.
  • financing conditions are also somewhat tighter than expected.

Other News

China Oct PMIs: Manufacturing 49.5 (expected 50.2) Non-manufacturing 50.6 (expected 51.8)

  • October 2023 official Chinese PMIs from the National Bureau of Statistics (NBS)

China’s factory activity unexpectedly pulled back in October, dropping convincingly back into contraction. There was the week-long holiday at the beginning of the month but that was a known known factored into estimates.

There had been some ‘green shoots’ of economic recovery in China, in the wake of a raft of government and central bank measures to shore up growth, including modest interest rate cuts, increased cash injections and aggressive fiscal stimulus, but this result will set those improvements back somewhat.

The Composite comes in at 50.7

  • prior 52.0

HSBC CEO says the worst has passed for China’s real estate implosion

HSBC CEO Noel Quinn spoke with media, saying the worst of China’s real-estate crisis is over, the government efforts to ease the sector’s debt-implosion were working:

  • “They went very deep and hard over a short period of time,”
  • “The sector has now adjusted, it’s adjusted dramatically downwards, and it’s got to try and rebuild itself over time…The sector itself has bottomed and it has to recover itself from that new lower position.”

Info comes via the Wall Street Journal (gated).

Australia data – ANZ Roy Morgan weekly consumer confidence 75.0 (prior 78.2)

Weekly consumer sentiment survey shunts 3.5 point lower

  • lowest since early August 2023
  • has now spent 39 straight weeks below the mark of 85 – equalling the longest streak at this level set in 1990-91

ANZ say the drop on the week is due to:

  • The ANZ-Roy Morgan Australian Consumer Confidence index declined last week after an uncomfortably high inflation print and expectations of a November rate hike by the RBA.The indices that capture confidence in ‘current’ conditions declined the most, including current finances, the short-term economic outlook and whether it is a good ‘time to buy a household item’. Among the housing cohorts, confidence fell across all groups.

Australian September Private Sector Credit +0.5% m/m (expected +0.3%)

Data from the Reserve Bank of Australia

  • Higher growth on a m/m basis for housing and business credit while lower growth m/m for personal credit (which is at strong levels though)

New Zealand October business confidence 23.4% (prior 1.5%)

ANZ Business Survey for October 2023 is much improved

  • Business confidence 23.4% (prior 1.5%)
  • Activity 23.1% (prior 10.9%)

New Zealand September Building Approvals data: -4.7% m/m (prior -7.0%)

Building consents were -37.% y/y

Stats NZ comment:

  • “The annual number of new homes consented has continued to decrease from its peak of 51,015 in the year ended May 2022,”
  • “However, the number of new homes consented in the year ended September 2023 is still at a higher level than any 12-month period prior to 2021.”

Bank of Japan Monetary Policy Statement: Changes language around 1% 10year JGB cap

  • BOJ decides to keep yield target but make 1% a reference cap

BOJ October 30 / 31 Monetary Policy Board meeting decision – no extension of the cap to 1.5% but instead formalised the 1% cap.

  • Keeps short-term interest rate target at -0.1%
  • Keeps 10-year JGB yield target around 0%
  • Widens reference range to 1.0% point up and down each around its10-year JGB yield target vs previous 0.5% point
  • Flexibly increase JGB buying, fixed-rate operations and collateral fund-supply operations
  • Changes language around 1.0% 10-year JGB yield cap
  • Decides to keep yield target but make 1% a reference cap
  • Will guide market operations nimbly
  • Will regard upper bound of 1% for 10-year JGB yield as reference inits market ops
  • Will determine offer rate for fixed-rate JGB buying ops each time, taking account market rates and other factors
  • Decides to make YCC more flexible
  • Japan’s inflation outlook overshooting but due largely to prolonged rises in import costs
  • Wages, prices must strengthen in virtuous cycle
  • BOJ will patiently continue monetary easing under YCC to supporteconomic activity, create environment where wages rise more
  • Appropriate to make YCC more flexible given very high uncertainty over economy, markets
  • Strictly capping long-term rate with fixed-rate purchase operation at 1% will have strong positive effects but could also entail large side effects
  • As such, boj decided to conduct YCC mainly through large-scale JGB buying and nimble market operations
  • BOJ makes no change to its forward guidance

Inflation forecasts boosted:

  • Board’s core CPI fiscal 2023 median forecast at +2.8% vs +2.5% in July
  • Board’s core CPI fiscal 2024 median forecast at +2.8% vs +1.9% in July
  • Board’s core CPI fiscal 2025 median forecast at +1.7% vs +1.6% in July
  • Board’s real GDP fiscal 2023 median forecast at +2.0% vs +1.3% in July
  • Board’s real GDP fiscal 2024 median forecast at +1.0% vs +1.2% in July
  • Board’s real GDP fiscal 2025 median forecast at +1.0% vs +1.0% in July

BOJ quarterly report:

  • Japan’s economy likely to continue recovering moderately
  • Inflation likely to slow, then re-accelerate as wages rise, inflation expectations heighten
  • Uncertainty over Japan’s economic, price outlook very high
  • Must be vigilant to financial, fx market moves and their impact on Japan’s economy, prices

BOJ quarterly report on risks:

  • Uncertainty over Japan’s economy, prices is extremely high
  • Need to closely watch financial, currency market moves, their impact on Japan’s economy, prices
  • Risks to price outlook skewed to upside in fy2023
  • Must closely watch whether favourable cycle of wage growth, prices will strengthen
  • Risks to economic outlook generally balanced in fy2023 and fy2024, but skewed to downside for fy2025
  • There is possibility wage growth may not strengthen as expected nextyear onward, causing prices to deviate downward

Summary bullets are via Reuters.

The main news is that the 1% 10-year JGB yield cap has been formalised. The Nikkei reported on Monday US time that Bank was considering a 1.5% cap, but that has not panned out.

The BOJ underdelivers once again

  • Yen bulls once again left disappointed by the Japanese central bank

Heading into the policy decision, market expectations were brought up in anticipating a change to the 10-year JGB yields ceiling i.e. from 1% to perhaps 1.25% or 1.50%. However, the BOJ instead chose to keep the focus on the 1% mark by making it a sort of point of reference as they say that:

“The Bank will maintain the target level of 10-year Japanese government bond (JGB) yields at around zero percent, it will conduct yield curve control with the upper bound of 1.0% for these yields as a reference and will control yields mainly through large-scale JGB purchases and nimble market operations.”

BOJ governor Ueda: Will patiently continue monetary easing with decided new measures

  • BOJ governor, Kazuo Ueda, remarks in his press conference
  • Will closely scrutinise economy, price situation by examining wages and prices
  • Main reasons for inflation outlook overshoot compared to July are longer-than-expected effects of price pass-through and rising oil prices
  • But we are not in a situation to foresee sustainable and stable price increases
  • Will not hesitate to take easing measures if necessary
  • Don’t think long-term rates will come under pressure to exceed 1%
  • Today’s steps came partly as a result of rising US long-term rates
  • Strength of inflation, wages still not sufficient
  • Inflation outlook is slightly improved but can’t say with full confidence that it can be sustained
  • But we are getting gradually closer to achieving the price target
  • Next spring’s wage negotiations will be an important factor
  • Believes that can anticipate a certain level of wage hike next year
  • But difficult to say if can achieve continuous cycle of wage hikes and price increases
  • Until achievement of inflation target is in sight, both YCC and NIRP will be in place
  • The order of end of either policy would depend on economic, financial trends at the time

Japan Sept. data: Preliminary Industrial Production +0.2% m/m (expected 2.5%)

  • Retail sales data also

Japan data for September 2023:

  • expected 2.5%, prior -0.7%
  • fo the y/y -4.6% (exp -2.3%, prior -4.4%)
  • forecast 1 month ahead is +3.9% (prior +5.8%)
  • forecast 2 months ahead is -2.8% (prior +3.8%)

Retail sales for September +5.8% y/y and a small miss

  • expected +5.9%, prior +7.0%

Japan data: September unemployment rate 2.6% (expected 2.6%)

The jobless rate in Japan is super-low and fell again from August.


Cryptocurrency News

Floki Inu price drops 15% as TokenFi hype subsides

  • Floki Inu price is down 15% after a solid breakout following TokenFi launch preceding Floki staking program.
  • FLOKI could reverse the bullish trend, falling 25% to break below critical support at $0.00002391.
  • A decisive move above the $0.00004010 resistance level would invalidate the bearish thesis, revitalizing the bulls.
  • The network accuses Bitget exchange of listing fake tokens, citing millions in odd trading volume.

Floki Inu (FLOKI) price bullishness is easing after a hard pump last week when the network was launching the TokenFi token in its endeavor to capitalize on the tokenization industry. Following a successful launch however, controversy sparked with users complaining of centralized exchanges creating honeypots.

Report that crypto funds had largest single week of inflows in over a year: ETF optimism

CoinShares data being cited for the reports that crypto-focused funds had the largest single week of inflows in over a year.This comes amidst the feverish optimism that a U.S. spot bitcoin exchange-traded fund will soon get approved by the US Securities and Exchange Commission.

From report:

  • Digital asset investment products logged inflows of $326M for the week ended October 27
  • Most since July 2022 (and 21st largest on record)
  • Bitcoin funds accounted for 90% of the inflowst
  • There was also inflows of $15M into short-BTC products

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