North American News
US Stock Indices Extend Winning Streak, Closing Higher for Third Straight Day
- Strong gains after the Fed keeps rates on hold
The NASDAQ index is up for the 4th consecutive day. The S&P and the Dow industrial average are up for the 3rd consecutive day. The gates they were led by the NASDAQ index which rose 1.64%. For the week the index is now up 2.64%.
A snapshot of the closing levels for the day are showing:
- Dow industrial average up 221.71 points or 0.67% at 33274.59
- S&P index of 44.06 points or 1.05% at 4237.87
- NASDAQ index up 210.22 points or 1.64% at 13061.46
For the trading week with 2 days to go:
- Dow industrial average is up 2.64%
- S&P index is up 2.93%
- NASDAQ index is up 3.31%
Shares of the large-cap stocks are all outpacing:
- Nvidia up 3.77%
- Meta up 3.52%
- Apple up 1.86%. Apple announces earnings after the close tomorrow
- Alphabet up 1.92%
- Microsoft up 2.37%
- Amazon up 2.99%
- Tesla up 2.041%
Atlanta Fed Q4 GDPNow +1.2% vs +2.3% previously
- It’s still early
The Atlanta Fed GDPNow tracker got plenty of attention ahead of last week’s GDP report because it was persistently on the high side and that proved to be right.
Now, it’s downshifting significantly and sees 1.2% growth in Q4. In their own words:
After this morning’s construction spending release from the US Census Bureau and the Manufacturing ISM Report On Business from the Institute for Supply Management, the nowcasts of fourth-quarter real personal consumption expenditures growth and fourth-quarter real gross private domestic investment growth decreased from 3.0 percent and -2.2 percent, respectively, to 1.5 percent and -2.8 percent, while the nowcast of thecontribution of the change in real net exports to fourth-quarter realGDP growth increased from 0.11 percentage points to 0.22 percentagepoints.
JOLTS job openings for September 9.553M versus 9.250M expected
- JOLTS job openings for September 2023 details
- Prior was 9.61m (revised to 9.497m)
- Hires 3,7%% vs 3.7% prior at 5.9M
- Separations rate 3.7% vs 3.6% prior
- Quits 2.3% vs 2.3% prior
US September ISM manufacturing PMI 46.7 vs 49.0 expected
- ISM manufacturing PMI for October 2023 highlights
- Prior report 49.0
- Prices paid 45.1 vs 45.0 expected. Last month 43.8
- Employment 46.8 vs 50.3 expected. Last month 51.2
- New orders 45.5 vs 49.2 prior
- Inventories 45.8 vs 45.8 prior
- Production 52.5 vs 52.5 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. Our customers have about-right inventory levels, but they paid more due to pandemic cost increases. Everyone is holding off on increasing inventories, hoping they can buy at lower costs.” [Apparel, Leather & Allied Products]
- “Overall, things continue to be very steady: Sales and revenue are as expected, and the supply environment has stabilized greatly versus 2021-22. Some things to watch include the Panama Canal (drought), U.S.-China relations, and the impact the UAW (United Auto Workers) strike could have on suppliers of ours who support automotive production. But overall conditions feel stable.” [Miscellaneous Manufacturing]
- “Cement negotiations have changed, with cement mills no longer offering annual or guaranteed pricing. We now want to contract more as a commodity, leaning toward quarterly, with fluctuating prices yet to be determined.” [Nonmetallic Mineral Products]
- “A recession feels imminent. Money continues to be pushed into thebank markets, driving inflation rates really high.Most plants are buying less material or reducing consumption in the name of sustainability, as well as running at 80 percent of capacity. Prices of some products may increase for the upcoming winter weather.” [Petroleum & Coal Products]
- “Business conditions and market demand remain strong. We are projected to be at capacity in the next 12 months.” [Primary Metals]
- “New business development is coming onboard. However, many forecasts are set for the beginning of 2024. Hiring and retaining quality people is still a struggle.” [Textile Mills]
US September construction spending +0.4% vs +0.4% expected
- US September construction spending
- Prior was +0.5%
ADP US October employment +113K vs +150K expected
- The October 2023 employment reading from ADP
- Prior was +89K
Details:
- small (less than 50 employees) +19K vs +95K prior
- medium firms (500 – 499) +78K vs +72K prior
- large (greater than 499 employees) +18K vs -83K prior
Changes in pay:
- Job stayers 5.7% vs 5.9% prior
- Job changers 8.4% vs 9.0% prior
“No single industry dominated hiring this month, and big post-pandemic pay increases seem to be behind us,” said Nela Richardson, chief economist, ADP. “In all, October’s numbers paint a well-rounded jobs picture. And while the labor market has slowed, it’s still enough to support strong consumer spending.”
US S&P Global manufacturing PMI final for October 50.0 vs 50.0 prelim
- S&P global manufacturing PMI for October 2023
- Flash estimate was 50.0
- Prior was 49.8
- A renewed rise in new orders supported the move away from declining sectoral health.
- Demand conditions were historically muted overall, with firms downwardly adjusting their output expectations for the year ahead
- Total new order growth was led by domestic demand, as new international sales fell further and at a slightly sharper pace than in September
- Input costs rose at the fastest pace since April
Siân Jones, Principal Economist at S&P Global MarketIntelligence, said:
“October PMI data signalled a stabilisation of US manufacturing conditions amid a renewed rise in new order inflows and firmer output growth. Demand conditions reportedly showed signs of improvement as customer interest revived, but this was once again largely focused on the domestic market as new export orders fell at a quicker rate.
“Of concern were reports of dwindling backlogs of work, previously used to help support production, as firms also revised down their expectations for future output to the lowest in 2023 so far. At the same time, manufacturers cut employment for the first time in over three years as workloads were reportedly insufficient to warrant additional hiring or the replacement of voluntary leavers.
“On the price front, manufacturers saw sharper increases in costs and output charges, as inflation regained some momentum in the sector. Higher oil and oil-derived input prices again spurred hikes, as rates of inflation accelerated for the third month running.”
US MBA mortgage applications w.e. 27 October -2.1% vs -1.0% prior
- Latest data from the Mortgage Bankers Association for the week ending 27 October 2023
- Prior -1.0%
- Market index 161.8 vs 165.2 prior
- Purchase index 125.2 vs 127.0 prior
- Refinance index 341.7 vs 354.0 prior
- 30-year mortgage rate 7.86% vs 7.90% prior
FOMC Statement for the November 2023 rate decision – No Change
- The full statement from the Federal Reserve rate decision on November 1, 2023
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT
Recent indicators suggest that economic activity expanded at a strong pace in the third quarter.Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low.Inflation remains elevated.
The U.S. banking system is sound and resilient.Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.The extent of these effects remains uncertain.The Committee remains highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.The Committee will continue to assess additional information and its implications for monetary policy.In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook.The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Adriana D. Kugler; Lorie K. Logan; and Christopher J. Waller.
Powell opening statement: The Committee is proceeding carefully
- Powell on November 1, 2023
- We remain strongly committed to bringing inflation back to goal
- The full effects of policy tightening have yet to be felt
- Economy has expanded well above expectations
- The labor market remains tight
- Supply and demand conditions for labor continue to come into better balance
- Nominal wage growth has shown some signs of easing
- The process of getting inflation back to 2% still has a long way to go
- We are highly attentive to the risks that inflation poses to our mandate
- A few months of good inflation data ‘only the beginning of what it will take’
- We are attentive to recent data showing resilience in growth and labor
- Data could warrant further tightening of monetary policy
- We will continue to make our decisions meeting-by-meeting
- Reducing inflation is likely to require a period of below-potential growth and labor market conditions softening
Powell Q&A: We are attentive to the increase in longer-term yields
- Comments from the Fed chairman
- We are attentive to the increase in longer-term yields
- Higher rates can have implications for monetary policy but would need to be persistent
- Higher yields are being reflected in the market and having an effect on borrowing
- It does not appear that policy expectations are driving rates
- We have not made any decisions on future meetings
- Going into the December meeting, we’ll get 2 more jobs and inflation reports
- Will look at all things into December but the idea that it’s difficult to re-start hikes after stopping, it’s just not true
- Decision for today was this meeting only
- The staff did not put a recession back into the forecast
- We’re not thinking about rate cuts or talking about rate cuts
- The question we are asking is: Should we hike more?
- We are proceeding carefully
- It feels like the risks are more two-sided now around inflation
- Labor demand is clearly very strong but we’ve seen supply of workers come online
- It’s not clear that the conflict in the Middle East is on track to have an economic impact on the USA
Treasury refunding announcement sees 10-year note sales rise $2 billion vs $3 billion expected
- Treasury announces upcoming auction sizes
- 2 year auctions increase $3 billion/month
- 3 year auctions increase $2 billion/month
- 5 year auctions increase $3 billion/month
- 10 year auctions increase $2 billion/month
- 30 year auctions increase $1 billion/month
- Total coupon sizes at $112 billion vs $114 billion expected (up $9b q/q)
JP Morgan says full impact of Federal Reserve rate hikes still to hit
Remarks from JPMorgan chief global equity strategist on the rate hikes so far:
- “I think there’s just a lag effect”
- “And this time around in this cycle, the lag simply may be longer than what we’re accustomed to sort of seeing in the prior cycles because of the unprecedented injection that we’ve got during Covid, and because of a relatively healthy starting point for things like balance sheets.”
- favors utilities, health care, and dividend stocks
- targets 4200 for the S&P 500 at year-end
Info via CNBC interview.
Canada S&P Global October manufacturing PMI 48.6 vs 47.5 prior
- Canadian manufacturing survey from S&P Global
- Prior was 47.5
- Input price inflation jumped the most since April
- Confidence in the outlook slipped to its lowest level for nearly three-and-a-half years
- Market conditions were also reported to have worsened in October, and this was the primary factor behind the eighth successive monthly fall in new work
Commenting on the latest survey results, Paul Smith,Economics Director at S&P Global Market Intelligence said:
“It was another disappointing month for the Canadian manufacturing sector, with output and new orders continuing to fall amid reports of underwhelming market demand. Sales to both domestic and international customers were again lower, and firms remain engaged in a cycle of destocking, seeking to cut any excess inventory that built up during the pandemic.
“Perhaps most worrying is the pickup in input price inflation since September, which added to pressure on firms at a time of dwindling demand. Such pipelinepressures only reinforce the potential for interest ratesto remain higher for longer, and companies seem aware of this, noting in their survey responses the potential forthese factors to lead to an economic recession over thenext year.”
Commodities
Gold declines after the Fed held rates steady
- Gold declined to $1,980 after the decision and is down by 0.25% on the day.
- The Fed decided to hold rates steady at the 5.25%-5.50% range.
- US Treausry yields are declining, which may limit the metal’s losses.
- The bank remains data-dependant and left the door open for another hike.
In Wednesday’s session, the Gold Spot price declined towards $1,980, seeing 0.25% gains after the Fed decision to hold rates at the 5.25%-5.50% range. The bank pointed out that it is still data-dependent and that it will take into account tighter financial conditions and the cumulative effects of the monetary policy for its next decisions.
Silver clears losses, gains after Powell’s words
- Silver found support at a low of around $22.55 and recovered to $22.90 clearing more than 1% of losses.
- The Fed decided to hold rates at the 5.25-5.50% range.
- Powell signalled that the end of the rate hike cycle is near.
- Falling US Treasury yields allowed the metal to find demand.
In Wednesday’s session, the white metal faced selling pressure, but Chair Powell’s dovish words made the grey metal reverse its course towards $22.90, and at the time of writing, it is up by 0.20% on the day.
After the Fed announced it would hold rates at the 5.25-5.50% range, Chair Powell sounded somewhat hawkish at the beginning of his presser that he would take into account the tighter financial conditions and the cumulative effects of the monetary policy for the next December decision.In addition, he welcomed the decelerating inflation and job creation figures, but he pointed out he still needs more data points to feel confident that the bank’s job is done. That being said, he then commented that the Fed had come very far with this rate-hike cycle and that is close to its end, which triggered a wave of risk-on flows benefiting the Silver’s price.
EIA weekly crude oil inventories +774K vs +1261K expected
- Weekly petroleum data
- Prior crude +1371K
- Gasoline +65K vs -803K expected
- Distillates -792K vs -1540K expected
- Refinery utilization -0.2% vs +0.4% expected
- Production estimate mbpd 13.2 vs 13.2 mbpd prior
- Impld mogas demand: 8.68 mbpd vs 8.94 mbpd prior
EU News
UK October final manufacturing PMI 44.8 vs 45.2 prelim
- Latest data released by S&P Global – 1 November 2023
- Prior 44.3
It’s just a slight downwards revision as UK manufacturing output, new orders and employment all showed declines in October. Meanwhile, business optimism fell further to a ten-month low. S&P Global notes that:
“The UK manufacturing downturn continued at the startof the final quarter of the year, meaning the factory sector remains a weight dragging on an economy already skirting with recession.
“Production volumes contracted for the eighth consecutive month, the longest sequence of continual decline since 2008-09, as weak demand at home and overseas led to a further retrenchment of new order intakes. Companies are finding trading conditions difficult as they face headwinds from client destocking, market uncertainty and the impactof the cost-of-living crisis on consumer demand.
“Risks to the outlook remain skewed to the downside. Business optimism dipped to a ten-month low and manufacturers’ increased belt-tightening drove cuts to employment, purchasing and inventories.
“Although both input prices and output charges fell in October, this brighter inflation outlook comes at the cost of increased recession risk, being a symptom of the broader weak demand malaise.”
UK October Nationwide house prices +0.9% vs -0.4% m/m expected
- Latest data released by Nationwide Homebuilding Society – 1 November 2023
- Prior 0.0%
Switzerland October manufacturing PMI 40.6 vs 45.0 expected
- Latest data released by Procure – 1 November 2023
- Prior 44.9
ECB’s Muller says inflation will continue to fall over the coming two years
Bank of Estonia Governor, and member of the European Central Bank Governing Council, Madis Müller had comments reported overnight.
They didn’t differ a lot from what he said back in Friday, along the lines that:
- inflation in the euro area is clearly coming down
- geopolitical tensions are causing energy prices to rise again, and the conflict in the Middle East and the danger of it spreading are one of the main risks facing the decline of euro area inflation
- inflation is still too high
- one of the main causes the relatively fast growth in wages
SNB’s Jordan says rate hikes not ruled out
- They all sing from the same hymn book
- UBS acquisition of Credit Suisse prevented global financial crisis
- Effective public liquidity backstop is needed
- Emergency liquidity provided without collateral should not become regular part of SNB’s instruments
- Faster and larger outflows are a new reality for banks
- We do not know how big is the impact of accumulated tightening so far
Other News
China says it will set up a system to resolve its local government debt risks
This info comes via China Central Television, reported by Bloomberg (gated).
In brief:
- China said it will set up a system to resolve debt risks of its local governments
- The plan was announced after a two-day, closed-door meeting to set the priorities for the US$61 trillion (RM290.63 trillion) financial sector
- oversight of the financial sector would be boosted
- efforts will be made to improve the regulation of property developers and their funds
China’s October Caixin Manufacturing PMI 49.5 (vs. 50.8 expected)
China’s October Caixin Manufacturing PMI comes in, back in contraction, at 49.5
- 50.8 expected, prior was 50.6
From the report, in brief:
- first contraction since July
- slower growth in overall sales
- weak foreign demand
- new export orders shrunk for four consecutive months
- weaker-than-expected sales and the delayed shipment of goods led to the strongest rise in inventories of post-production items since September 2015
- manufacturers trimmed staffing levels for the second straight month, the rate of job shedding the quickest since May
- higher prices for raw materials and oil, pushed the rate of input inflation ticked up to nine-month high
Australian final manufacturing PMI for October: 48.2 (prior 48.7)
- Warren Hogan, Chief Economic Advisor at Judo Bank commentary from the report, in summary:
- The slight decline in the PMI index to 48.2 masks a more profound fall in the key output and new orders indexes.
- The output and new orders indexes fell to concerning levels in October, lower than what would normally be associated with a soft patch.
- The employment index fell to the lowest level since the 2020 lockdowns, although the index level remains above the 50 index level.
- The solid employment result also cautions against reading too much into the falls in output and new orders in October.
- Cost pressures increased further in October, with the inputprice index rising to the highest level since March.There has been a clear upward trend for costs since the June low point, which is indicative of an intensification of business cost pressures in the current financial year.
- Contrary to rising input prices, there has been another fall in the output price index. Output prices remain above the neutral 50 level, indicative of low inflation of manufactured goods. Output prices are now back down to what would be considered normal prior to the pandemic.
- Rising cost pressures and low final price inflation do not bode well for manufacturers’ margins and profitability. If margin pressures are sustained, businesses will eventually need to pull back on investment and hiring to protect profitability.
Australian Building Approvals for September: -4.6% m/m (expected +1.3%)
Australia Building Approvals for September 2023 come in at -4.6% m/m
- expected +1.3%, prior +7.0%
IMF tells the RBA to hike interest rates higher, and hold ’em high for longer
International Monetary Fund (IMF) issued its annual report into the Australian economy. It warned that although inflation was easing, it was still too high. The IMF urged the RBA to hike rates:
- “Although inflation is gradually declining, it remains significantly above the RBA’s target and output remains above potential,”
- “Staff therefore recommend further monetary policy tightening to ensure that inflation comes back to the target range by 2025 and minimise the risk of de-anchoring inflation expectations.”
Also weighed in on fiscal policy:
“The Commonwealth government and state and territory governments should implement public investment projects at a more measured and co-ordinated pace, given supply constraints, to alleviate inflationary pressures and support the RBA’s disinflation efforts,”
New Zealand Q3 unemployment rate 3.9% (vs. 3.9% expected)
- New Zealand employment report for Q3 2023
RBNZ’s Hawkesby speaking on financial stability, China, jobs
- Hawkesby mentions that slow demand from China is hitting commodity prices.
- He also remarked on the jobs data earlier, saying NZ can handle higher rates of unemployment.
Japan October final manufacturing PMI 48.7 (preliminary was 48.5)
Final PMI from Japan for October 2023 comes in at 48.7:
- flash was 48.5
- 48.5 prior
Comments from the report:
“Another month of deteriorating operating conditions was signalled by the PMI during October, as depressed industrial demand both at home and abroad weighed on sector performance. Companies continued to batten down the hatches by cutting purchasing, not replacing leavers and focusing on smart inventory management to minimise any unnecessary plant costs. Still, inflationary pressures remained somewhat sticky, with costs again rising quite steeply and charges up to a marked degree.
“There are hopes however that the current market downturn is finding a bottom. Firms are widely anticipating some growth and improvement in 2024, with the inventory cycle expected to turn after a prolonged period of destocking, and demand from key Japanese industrial sectors forecast to rise over the coming 12 months.”
Japan finance minister Suzuki has no comment on the weak yen
And we all know that ‘no comment’ from Suzuki means there will be plenty of comments incoming.
- no comment regarding weak JPY following the Bank of Japan policy decision yesterday
Japan’s Mr Kanda says concerned about one-sided sharp FX moves
Japan’s Finance Ministry’s Vice Finance Minister for International Affairs Kanda. He is the official who will instruct the BOJ to intervene, when he judges it necessary. Often referred to as Japan’s ‘top currency diplomat’.
- Concerned about one-sided, sharp fx moves
- Speculative moves seen playing the biggest factor
- Won’t rule out any steps to respond to disorderly fx moves
- Did not intervene in FX market last month
- In close contact with authorities internationally on FX
- FX moves affect price stability target
- Says speculative forex moves seen that cannot be explained by fundamentals
- Concerned that one-sided, sharp forex moves negatively affect economy
- Authorities may or may not say when conducted intervention
Japan’s Matsuno says rapid FX moves are undesirable
Japan chief cabinet secretary Matsuno with some verbal intervention to proper up the yen:
- Important for currencies to move in stable manner reflecting fundamentals
- Rapid fx moves undesirable
- Won’t comment on forex levels
- Won’t rule out any steps to respond to disorderly fx moves
“BoJ will leave interest rates on hold until Q2 2024 at the earliest”
Commonwealth Bank of Australia with thier response to the Bank of Japan yesterday, in summary:
- The Bank of Japan (BoJ) kept its policy rate unchanged at – 0.1% and the 10 year Japanese government bond (JGB) yield target unchanged at 0%.
- The previous 1% hard upper limit for the 10 year JGB has been removed. Instead the 1% level will be viewed as a reference. Yield curve control is still in place.
- CPI inflation forecasts were revised higher. However the FY25 CPI forecast is 1.7%, below 2% target.
- We maintain our forecast that the BoJ will leave interest rates on hold until Q2 2024 at the earliest.
- Overall the inflation forecasts and still-dovish policy guidance suggest the BoJ is unlikely to tighten monetary policy in any meaningful way. We maintain our view that the BoJ will not lift interest until there is evidence of a large Shunto wage increase flowing through to economy-wide wage increases. The earliest we envisage a policy tightening is Q2 2024 after the Shunto agreement in April 2024.However we do not rule out further changes to yield curve control.
Cryptocurrency News
SOL open interest rises nearly $50 million in three days as Solana price revisits pre-FTX collapse highs
- Solana price has forayed above $40.80, levels last tested in August 2022, three months before FTX imploded.
- The surge comes with rising open interest, up $46 million since October 30.
- It comes amid the ongoing Solana Breakpoint conference, with discussions of bringing off-chain assets on-chain via SOL network.
Solana (SOL) price is trading with a bullish bias, indicating a solid uptrend in the daily timeframe and outperforming the broader market. It comes on the back of the ongoing Solana Breakpoint conference in Amsterdam, Netherlands, provoking or exciting the hands of perpetual traders.
Federal Reserve pauses interest rate hikes for second time in a row, Bitcoin price still tethered to $34,600
- The Federal Open Market Committee (FOMC) meeting took place on November 1, recording no change in interest rates.
- Per the announcement, the Federal Reserve paused rates for the second time in a row, holding steady at 5.25% – 5.50%.
- Bitcoin price remains unphased, still capped under the $35,000 psychological level to trade at $34,600 at the time of writing.
The Fed has decided to pause interest rate hikes, the second time in a row, meeting the expectations of many at 5.25% – 5.50%.The development is a paradigm shift, relative to the past year, when the central bank aggressively tightened monetary policy in a bid to fight inflation.
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