North American News
US Stocks Close Modestly Lower Amid Mixed Data and AMD’s AI Chip Launch
Major US indices finished slightly down on Thursday following record highs in the S&P and Dow the previous day.
Market Overview:
- Dow Jones: -57.92 points (-0.14%) at 42,454.18
- S&P 500: -11.99 points (-0.21%) at 5,780.05
- NASDAQ: -9.57 points (-0.05%) at 18,282.05
- Russell 2000: -12.16 points (-0.55%) at 2,188.41
The CPI data came in higher than anticipated, and PPI figures are set to be released tomorrow. Jobless claims were above expectations, though factors like strikes and weather may have skewed the data.
Notable Movers:
- AMD: Fell 4.0% after unveiling its new AI chip, MI325X, aimed at rivaling Nvidia’s data center GPUs. AMD plans to begin production in late 2024, with hopes of capturing a significant share of the AI market, which it estimates will grow to $500 billion by 2028.
Upcoming Earnings:
- Bank earnings start tomorrow with BNY Mellon, Wells Fargo, and J.P. Morgan Chase.
- Next week, reports include Bank of America, Goldman Sachs, Citibank, and others.
Investors remain cautious amid inflation concerns and upcoming corporate earnings reports.
US treasury auctions off $22 billion of 30 year bonds at a high yield of 4.389%
- WI level at the time of the auction 4.404%
- High yield: 4.389%
- WI level at the time of the auction: 4.404%
- Tail -1.5 basis points basis points versus six-month average job 0.9 basis points
- Bid to Cover 2.50X versus six-month average of 2 38X
- Directs (domestic buyers) 7.37% vs six-month average of 18.4%
- Indirect (international buyers): 80.47% versus six-month average of 65.4%
- Dealers: 12.16% versus six-month average job 16.2%
US initial jobless claims 258K vs 230K estimate
- The weekly initial and continuing claims data
- Prior week 225K
- Initial jobless claims 258K vs 230K estimate
- 4-week moving average initial jobless claims 231K vs 224.25K
- Prior week of continuing claims 1.826M revised to 1.819M
- Continuing Claims 1.861M vs 1.830M estimate
- 4-week moving average of continueing claims 1.832M vs 1.828M
The largest increases in initial claims for the week ending September 28 were in Michigan (+1,187), Washington (+892), Indiana (+657), California (+638), and Iowa (+568), while the largest decreases were in Georgia (-1,237), Florida (-919), Texas (-532), Virginia (-481), and New York (-451).
US September CPI 2.4% y/y versus 2.3% expected
- US September 2024 consumer price index
- Prior was +2.5% y/y
- m/m reading at +0.2% vs +0.1% expected
- Month-over-month unrounded +0.1604% vs +0.081% prior
Core measures:
- Core CPI +3.3% vs +3.2% expected
- Core CPI m/m +0.3% vs +0.2% expected
- Core unrounded +0.3124% vs +1549% m/m
- Real weekly earnings -0.1% vs +0.5% prior
- Core services ex shelter +0.554% vs +0.239% prior
- Core-CPI services ex-rent/OER +0.404% vs +0.328% prior
Fed’s Williams: Expects that the economy will allow the Fed to cut further
- Comments from Williams
- Expecs inflation to wane to 2.25% this year and close to 2% next year
- Sees GDP this year between 2.25% and 2.50%
- Recent Fed rate cut should leave the economy in a strong place
- Pace and size of future cuts to be determined by economic data
- Job market unlikely to an inflation driver going forward
- Sees unemployment at 4.25% and around that in 2025
- Markets have absorbed policy shifts well
- Overall balance of risks is pretty good right now
Fed’s Goolsbee: Inflation came in around expectations, improvement on housing
- Goolsbee is speaking on CNBC
- There have been a series of ‘close call’ type meetings
- There will probably be more close call meetings
- Still a lot of data coming in on what’s next, nothing is ever not on the table
- We don’t want to get ahead or behind
- Job market has cooled to a level of full employment
- Fed projections show vast majority believes that over the next 12-18 months, rates come down a fair amount
- The Fed has to take a longer view
- If data continues to illustrate that employment is not deteriorating, that will relieve some of my concerns
Fed’s Barkin: Inflation is headed in the right direction
- Comments from the Richmond Fed President
- Inflation is down but we can’t declare victory
- Sees risk that lower rates boost housing demand
JP Morgan raise the question of no cut at the Federal Reserve November 7 FOMC meeting
- Analysts at the bank still tip a 25 rate cut. But
Analsysts at JP Morgan are still forecasting a 25bp Fed Funds rate cut at the November 7 Federal Open Market Committee (FOMC) meeting.
But, they point to stronger data since the September meeting as a reason why debate at that meeting will raise the question of whether or not be leave the rate unchanged, on hold.
Fed’s Daly: One or two more Fed rate cuts likely this year
- Federal Reserve Bank of San Francisco President Mary Daly
- Fully supported half-point rate cut
- Quite confident we are on path to 2% inflation
- We are at full employment
- With policy rate steady, real rate was rising
- Rising real rate was a recipe for overtightening and injuring the labor market
- Rate cut was a recalibration, to rightsized rates for the economy
- Size of September rate cut does not say anything about pace or size of next cuts
- Two or one more cut this year is what is likely
- We will watch data, monitor labor market and inflation
- We will make more or fewer adjustments to rates as necessary
- I do not want to see further slowing in the labor market
- Most firms are seeing a hybrid work situation, not a return to a 5-day-in-the-office situation
- I am not worried about accelerating inflation
- I was more worried about injuring the labor market
- Will watch inflation data carefully
- Little evidence that balance sheet expansion has much of a direct effect on inflation
- We are coming near the inflation target but not satisfied, no victory declared
- Balance sheet is coming down to more normalised levels.
Trump could create a ‘Shadow’ Fed Chair – undermine Powell
- Scott Bessent, one of Donald Trump’s closest economic advisers, proposal
Info comes via Barrons (may be gated).
Scott Bessent is described as “one of Donald Trump’s closest economic advisers”. He has proposed that Trump nominate and seek Senate confirmation of Powell’s replacement well over a year before Powell’s term ends in May 2026.
In effect, a ‘shadow’ Chair. The approved nominee would need to wait for Powell’s term to end but the idea is that person’s guidance, predictions, and potential criticism of the Fed’s actions would weigh heavily on financial markets.
- “You could do the earliest Fed nomination and create a shadow Fed chair,” said Bessent. “And based on the concept of forward guidance, no one is really going to care what Jerome Powell has to say anymore.”
- “This is my idea, not the president’s,” Bessent said in an interview.
- Ed Yardeni, a longtime Fed watcher and the president of Yardeni Research, called it a “terrible” idea, explaining that a shadow Fed chair would “create a lot of noise in the market.”
More at that link above if you can access it.
Commodities
Gold Climbs Amid Mixed US Economic Data
Gold prices saw a modest recovery today, bouncing from a low of $2,603, following mixed US economic data that reflected a slight uptick in inflation but weaker job figures.
Market Overview:
- Gold traded higher, up approximately 0.67%, settling around $2,624 after the release of US inflation data that came in hotter than expected. However, the gains were constrained by hawkish comments from Federal Reserve officials, who hinted at a gradual approach to interest rate cuts.
Economic Data Highlights:
- The US Consumer Price Index (CPI) for September rose by 2.4% year-over-year, surpassing estimates of 2.3%, though it was still lower than August’s figure. Core CPI increased by 3.3% year-over-year, exceeding both forecasts and the previous month’s 3.2%.
- Monthly CPI showed a rise of 0.2%, matching the previous month but above the consensus estimate of 0.1%. Core CPI remained steady at 0.3%, exceeding the expected 0.2%.
- Initial Jobless Claims for the week ending October 5 rose to 258,000, up from 225,000 the previous week and above the estimated 230,000.
Federal Reserve Insights:
- Chicago Fed President Austan Goolsbee indicated he anticipates gradual cuts over the next year and a half, given that inflation is nearing the Fed’s 2% target.
- New York Fed President John Williams suggested that the timing and pace of any future interest rate adjustments would depend on evolving economic data.
- Atlanta Fed President Raphael Bostic expressed openness to pausing rate cuts in November, adding uncertainty to future monetary policy.
Market Sentiment:
- The mixed data has led the swaps market to predict a 25 basis point rate cut at the Fed’s November meeting, which has bolstered bullion prices. However, the stronger dollar, evidenced by a slight gain in the US Dollar Index (DXY) at 102.97, has put some pressure on gold.
Upcoming Indicators:
- Traders are now focused on the upcoming release of the Producer Price Index (PPI) and the University of Michigan Consumer Sentiment report, which may provide further insights into inflationary trends and consumer behavior.
As gold prices continue to respond to economic signals, the interplay between inflation data and Federal Reserve policy will remain critical in shaping market dynamics moving forward.
Silver Rebounds, Climbs Above $31.00 as Mixed US Data Fuels Momentum
Silver rallied past the October 9 high of $30.77, supported by mixed US inflation and jobs data, and traded at $31.12 at the time of writing.
Market Overview:
- Silver rebounded from a three-week low, gaining over 0.60% following a slight increase in US inflation and weaker jobs figures. However, hawkish remarks from Atlanta Fed President Raphael Bostic limited further advances for the white metal.
Technical Outlook:
- Resistance: Silver’s momentum has turned slightly bullish, with the Relative Strength Index (RSI) breaking above the neutral 50 level, indicating buyer control. To confirm a bullish continuation, Silver must surpass the key resistance at $31.50. The next targets include the $32.00 figure, followed by the year-to-date (YTD) high of $32.95.
- Support: A drop below $31.00 could trigger a pullback, with immediate support at $30.22 (October 9 low) and $30.12 (October 8 low).
Silver’s movement will continue to be influenced by US economic data and Federal Reserve comments, with the potential for volatility in the coming sessions.
EU News
European equities closes mostly down
- Closing changes in Europe:
- Stoxx 600 -0.2%
- German DAX -0.2%
- France CAC -0.2%
- UK FTSE 100 -0.1%
- Spain IBEX -0.7%
- Italy’s FTSE MIB +0.4%
Germany August retail sales +1.6% vs +0.1% m/m expected
- Latest data released by Destatis – 10 October 2024
- Prior -1.2%
RICS house price balance positive for the first time since October 2022
- Royal Institution of Chartered Surveyors (RICS) report for September
The Royal Institution of Chartered Surveyors main house price balance measures the difference between surveyors seeing falls and rises in house prices
It rose to +11 in September
- expected +4
- August was 0
- the September move into positive territory is the first since October 2022
- sales and enquiries also rose
RICS comment:
- “A further unwinding in monetary policy is anticipated over the months ahead, which should create a more favourable backdrop for the market moving forward”
French budget watchdog says government 2025 growth forecast is too high at 1.1%
- A bit of a rebuke
- Says 2025 GDP forecast of 1.1% seems a bit too high
- Inflation forecast of 1.8% next year seems a bit too high
- 2025 deficit target seems fragile
SNB’s Martin: No plans to use negative interest rates at the moment
- Comments from the SNB vice chairman
- SNB has already pointed to another interest rate cut, but there are no promises
- With Swiss inflation low and economy that could be stronger, that points towards lower rates
- We are assured that Swiss inflation will remain firmly within the 0-2% price stability band
- No plans to use negative interest rates at the moment
- There are imaginable scenarios where we could take rates negative, but this is not a situation being considered at present
- The SNB does not have a balance sheet objective by itself
Inflation expected to rise again in the latter part of this year – ECB accounts
- The ECB releases the accounts of its September monetary policy meeting
- But inflation is then expected to decline towards target over the second half of next year
- Too early to declare victory against inflation
- Core inflation and services inflation might be stickier and not decline as much as expected
- But disinflationary process remains on track
- The risk of delays in reaching the target warrants some caution against dialing back policy restriction prematurely
- Need to carefully monitor whether inflation would settle sustainably at target in a timely manner
UK losing HNW individuals faster than any other country – worst in the world
- Info comes via the UK’s Adam Smith Institute
Info comes via the UK’s Adam Smith Institute (ASI) on the exodus of high net worth individuals from the UK:
- Today, 4.55% of British residents are millionaires, but the ASI has forecast that this will fall to 3.62% by 2028;
- The fact that the UK is losing proportionately more millionaires than China or Russia is a worrying indicator of our economic health and growth prospects;
- Millionaires are leaving the UK for a number of reasons, including high levels of current taxation, threats of further increases, a hostile culture towards wealth-creators and , the abolition of the non-dom regime, and a culture which is hostile to wealth-creators;
- Former Chancellor of the Exchequer, Nadhim Zahawi, urges the Government to rule out measures in the Budget targeted at high net worth individuals. Instead, the Chancellor ought to cut or abolish anti-prosperity taxes.
Asia-Pacific-World News
China imposes sanctions on three US military firms on Taiwan arms sales
- The countermeasures here will go into effect starting from today
The sanctions will apply to the following firms: Edge Autonomy Operations LLC, Huntington Ingalls Industries Inc, and Skydio Inc. At the same time, ten US individuals are also being sanctioned as part of the same countermeasures.
PBOC to establish securities, funds to aid capital market stability
- Stability measures
People’s Bank of China will establish a SFISE (security, funds and insurance companies swap facility) for 500bn yuan.
To build capital market stability. Those security, funds and insurance companies eligible can pledge assets such as bonds, stock ETFs, and CSI300 stocks. They’ll receive liquidity from the PBOC to boost their capacity to access funds, increase equity holdings.
At the margin a positive for stocks and markets in the country more generally.
More on “China’s Central Bank Launches Swap Facility to Boost Stock Market”
- People’s Bank of China boosting Chinese equities
The Wall Street Journal have a recap on this now. The Journal is gated but here is the link if you can access it.
- that eligible brokers and insurers can now pledge assets such as bonds, stock ETFs, and shares of companies listed on the CSI 300 index to obtain liquid assets like Treasury bonds from the central bank.
- It added that it is now accepting applications and may expand the facility’s size in the future.
PBOC sets USD/ CNY reference rate for today at 7.0742 (vs. estimate at 7.0734)
- PBOC CNY reference rate setting for the trading session ahead.
In open market operations (OMOs):
- PBOC injects 150bn yuan via 7-day RR, sets rate at 1.5%
- 292bn yuan mature today in OMOs
- Net drain of 142bn yuan
The build up to the next China ‘stimulus’ briefing is on – arriving on Saturday
- China’s Ministry of Finance briefing
China’s Ministry of Finance briefing is scheduled for 10 am Beijing time on Saturday. October 12.
- to provide insights into fiscal policy and economic development … or ” intensifying countercyclical adjustments to its fiscal policy” according to invitation documents
Australian data – October consumer inflation expectations 4.0% (prior 4.4%)
- The Melbourne Institute Survey of Consumer Inflationary Expectations
The Melbourne Institute Survey of Consumer Inflationary Expectations
October 2024 comes in at 4.0%
- a sharp drop from September’s 4.4%
The Reserve Bank of Australia target band is 2 to 3% for inflation.
BOJ’s Himino: We will hike rates if outlook for economy, prices in July report is achieved
- Remarks by BOJ deputy governor, Ryozo Himino
- We are witnessing record high wage increases in Japan
- Policy board is going to look at the totality of the data as it makes decisions
- It will be done on a meeting by meeting basis
- Real interest rates are still negative
- Will have more data on pass through of wage hikes on prices later in the year
- Also more data on how things are shaping up for next year’s spring wage negotiations
- Ueda told PM Ishiba that BOJ has enough time to carefully monitor financial markets
- There is no silver bullet in better communication
- Each approach comes with pros and cons
- No clear consensus among policymakers about future approach on better communication
- But there is a strong will to learn from what happened in August
Japan households still largely expecting prices to be higher a year from now – BOJ survey
- The latest from the BOJ’s quarterly opinion survey on the public’s views and behaviour
- 85.6% of Japanese households expect prices to rise a year from now (previously 87.5%)
- 94.7% of households feel present level of prices are higher compared to a year ago (previously 95.0%)
- 6.6% of households anticipate economic conditions to improve a year from now (previously 7.9%)
- 56.5% of households anticipate economic conditions to be roughly the same a year from now (previously 50.9%)
Japan PPI (September) 0.0% m/m (expected -0.3%) and +2.8% y/y (expected +2.3%)
- The PPI is also referred to as the Corporate Goods Price Index, its published by the Bank of Japan.
September 2024 PPI 0.0% m/m, while its zero that’s higher than August and than the expected.
- expected -0.3%, prior -0.2%
+2.8% y/y, a clear beat of the consensus estimate and August
- expected +2.3%, prior +2.5%
Japan government junior coalition partner says utility and fuel subsidies should continue
- Election is approaching in case you were wondering
The election in Japan is coming up on Sunday 27 October 2024
Voting will take place for seats in the House of Representatives. Currently the LDP rule in coalition with junior coalition partner Komeito.
The leader of Komeito says fuel and utility subsidies should continue ‘for a while’.
Cryptocurrency News
Bitcoin Falls Below $60,000 as SEC Targets Cryptocurrency Market Again
Bitcoin experienced a notable decline, dropping below $60,000 for the first time since mid-September, reflecting increasing regulatory pressures on the cryptocurrency market.
Market Overview:
- Bitcoin broke the $60,000 mark earlier today but struggled to maintain its momentum, resulting in a slump as the SEC intensified its scrutiny of digital assets. The regulatory body has recently issued a Wells Notice to Crypto.com, alleging it operated as an unregistered broker-dealer and securities clearing agency.
- In response, Crypto.com filed a lawsuit to defend itself, with CEO Kris Marszalek condemning the SEC’s actions as “unauthorized overreach and unlawful rulemaking regarding crypto.”
Regulatory Actions:
- The SEC also charged Cumberland DRW with acting as an unregistered dealer for transactions exceeding $2 billion in crypto assets. These actions have raised concerns among investors about the future of regulatory compliance in the cryptocurrency space, contributing to the market’s recent downturn.
Market Sentiment:
- This regulatory focus comes at a time when Bitcoin had shown relative stability, but analysts caution that a significant price movement may occur once the current $50-72K range is broken. Today’s developments signal increased uncertainty, which is not favorable for risk assets.
Other Developments:
- Additionally, Japanese courts have extended the deadline for repayments in the Mt. Gox liquidation to October 31, 2025. While many rehabilitation creditors have received payouts, others are still awaiting their funds due to incomplete procedures for claiming repayments.
Conclusion: As the SEC continues to scrutinize the cryptocurrency industry, Bitcoin’s recent struggles highlight the potential impact of regulatory developments on market performance. Investors will be watching closely as the situation evolves, particularly in relation to future price movements and regulatory clarity.
Ethereum Faces Downturn as US Inflation Rises and Exchange Reserves Increase
Ethereum (ETH) experienced a significant decline, breaching the $2,395 level and plunging 3.8% on Thursday following the release of US inflation data.
Market Overview:
- The recent uptick in US inflation has added pressure on Ethereum, resulting in two consecutive days of losses for the cryptocurrency market. The September Consumer Price Index (CPI) rose to 2.4%, slightly above the anticipated 2.3%, while core inflation increased from 3.2% to 3.3%.
ETF and Exchange Dynamics:
- Ethereum ETFs recorded zero flows for the second time this week, indicating a lack of buying or selling activity from the nine issuers. This trend, marking the third occurrence since their launch on July 23, reflects prevailing bearish sentiment within the market.
- Ethereum exchange reserves have surged by over 170,000 ETH in the past six days. This increase typically signals rising selling pressure, which may further contribute to downward price movement.
Long-Term Investor Sentiment:
- Despite the recent downturn, the amount of staked ETH continues to grow, with approximately 34.78 million ETH—representing about 28.9% of all circulating ETH—staked across various protocols. This includes more than 15.3% of the staked ETH being held for over three years, suggesting a long-term bullish outlook among investors.
As Ethereum navigates these challenges, the interplay between rising inflation, investor sentiment, and exchange dynamics will be crucial in determining its price trajectory moving forward.
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