North American News
Stock Market Closes Choppy Week with Strong Rally
The stock market concluded a volatile week with a robust rally, highlighted by record highs for both the S&P 500 and Dow Jones Industrial Average.
Market Performance Snapshot:
- Dow Jones Industrial Average: +409.74 points (+0.97%) at 42,863.86 (record high)
- S&P 500: +34.98 points (+0.61%) at 5,815.03 (new record)
- NASDAQ Composite: +60.89 points (+0.33%) at 18,342.94 (within 1.66% of all-time high)
- Russell 2000: +45.99 points (+2.10%) at 2,234.41 (largest gain today)
Weekly Performance:
- Dow: +1.21%
- S&P 500: +1.11%
- NASDAQ: +1.13%
- Russell 2000: +0.97%
Notable Winners of the Week:
- Trump Media & Technology Group: +53.21%
- Uber Technologies: +16.14%
- Super Micro Computer: +15.89%
- Robinhood Markets: +14.77%
- CrowdStrike Holdings: +9.57%
Notable Losers of the Week:
- Raytheon: -17.17%
- Tesla: -12.95%
- First Solar: -8.51%
- Nio A ADR: -7.89%
- Tencent ADR: -6.65%
Summary of the Week: The S&P 500 reached above 5,800 for the first time, and the Dow Jones surged more than 400 points to close at an all-time high. The Russell 2000 led the gains, climbing 2.1%. Tesla’s recent struggles following the unveiling of its robotaxi weighed heavily on its stock price, while strong earnings reports from major banks like JPMorgan Chase and Wells Fargo provided support to the broader market.
Economic Data Impact: The rally was bolstered by economic data indicating that inflation pressures might lead the Federal Reserve to consider rate cuts. The September Producer Price Index (PPI) remained flat at 0.0%, down from 0.2% in August. Core PPI rose by 0.2%, slightly below the previous month’s 0.3%. Additionally, the University of Michigan’s preliminary Consumer Sentiment Index fell to 68.9 in October from 79.1 in September, highlighting ongoing consumer concerns.
Market Trends: The S&P 500 financial sector closed at the top of the leaderboard, up 2.0%, while the consumer discretionary sector lagged, showing a 0.4% loss. The bond market will be closed on Monday in observance of Columbus Day, following a week where the 10-year Treasury yield settled at 4.07% and the 2-year yield at 3.94%.
As investors digest this week’s economic indicators and corporate earnings, the overall market sentiment remains cautiously optimistic amid mixed signals regarding inflation and consumer confidence.
US October UMich prelim consumer sentiment 68.9 vs 70.8 expected
- Final revisions to the October 2024 UMich consumer survey
- Sept final reading was 70.1
- Current conditions 62.7 vs 64.3 expected (63.3 prior)
- Expectations 72.9 vs 75.0 expected (74.4 prior)
- 1-year inflation 2.9% vs 2.7% prior
- 5-year inflation 3.0% vs 3.1% prior
Here is the commentary in the survey:
Consumer sentiment inched down a meagre 1.2 index points in October, well within the margin of error, following two straight months of gains. Sentiment is currently 8% stronger than a year ago and almost 40% above the trough reached in June 2022. While inflation expectations have eased substantially since then, consumers continue to express frustration over high prices. Still, long run business conditions lifted to its highest reading in six months, while current and expected personal finances both softened slightly. Despite widespread news coverage about the Middle East and Ukraine, few consumers connected these developments to the economy. Concerns over these conflicts climbed this month but were relatively rare, mentioned spontaneously by less than 5% of consumers. With the upcoming election on the horizon, some consumers appear to be withholding judgment about the longer term trajectory of the economy.
This chart speaks to those comments:
US PPI data revealed mixed results
- YoY 1.8% vs 1.6% estimate
- Ex Food and energy 2.8% vs 2.7% estimate
- The PPI details for September 2024
- Prior month 1.7% revised to 1.9%. YoY. Core 2.4% revised to 2.6%
- PPI MoM 0.0% for September
- PPI ex food and energy 0.2% vs 0.2% est.
- PPI ex food and energy and Trade YoY 3.2% vs 3.3% last month
- PPI ex food and energy and trade MoM 0.1% vs 0.2% last month (revised from 0.3%)
Looking at the details from final demand services and goods:
Final Demand Services:
- Increased 0.2% in September, following a 0.4% rise in August
- Leading contributors:
- Deposit services (+3.0%)
- Machinery and vehicle wholesaling
- Furniture retailing
- Desktop and portable device application software publishing
- Declines:
- Professional and commercial equipment wholesaling (-6.3%)
- Securities brokerage and dealing
Final Demand Goods:
- Decreased 0.2% in September, following no change in August
- Leading contributors to decline:
- Gasoline (-5.6%)
- Diesel fuel
- Jet fuel
- Chicken eggs
- Home heating oil
- Increases:
- Processed poultry (+8.8%)
- Electric power
- Motor vehicles
Overall:
- Final demand services less trade, transportation, and warehousing rose 0.1%
- Final demand trade services rose 0.2%
- Final demand transportation and warehousing services rose 0.3%
Fed’s Logan: Less-restrictive policy will still cool inflation
- Comments from the Dallas Fed President
- Less-restrictive policy will still cool inflation
- Recent inflation data is very welcome
Fed’s Goolsbee: Inflation has cooled, labour market remains strong
- Chicago Fed president, Austan Goolsbee, comments on Bloomberg’s Odd Lots
- Doesn’t see convincing evidence that the economy is overheating
- Let’s not overreact to “one number”
- Dot plots indicate that policymakers are of the view that inflation will move towards target
- The big picture is that inflation is “way down”, unemployment is at a level we are happy with
- The difference between now and the 70s is that inflation expectations never went up this time
- The market trusted the Fed’s credibility in promising that inflation will return to 2% target
Elon Musk unveiled the Robotaxi at Tesla’s “We, Robot” event
- CyberCab, driverless Model Y
The Robotaxi on display at the event has no steering wheel, no pedals. Fully autonomous apparently.
Musk says 50 built so far.
Musk says TSLA will start fully unsupervised FSD rides in Texas and California in 2025
- manufacturing to start in 2026
- targeting high volume production prior to 2027
- says price will be under US$30K
- there will be a 20 seat Robovan, also fully autonomous
JP Morgan projects US inflation to gradually return to Fed target rate
- JPM not expressing much concern on the US CPI data Thursday, maintain a 25bp rate forecast for the November FOMC meeting
JPM says the inflation figures are “broadly consistent” with inflation gradually falling back to the Fed 2% target rate. JPM maintains its forecast for a 25bp rate cut from the Federal Open Market Committee (FOMC) in November.
“Tesla robotaxi event comes after a decade of unfulfilled promises from Elon Musk”
- Musk’s CyberCab event coming up soon
This via CNBC:
- After a decade of unfulfilled promises to deliver autonomous vehicles, capable of traveling reasonable distances safely without a human at the wheel, there’s a hefty dose of skepticism about what Tesla can do technologically, and when its robotaxi might actually hit the market.
- Robotaxi day, or “We, Robot,” event is scheduled to begin at 7:00 p.m. Pacific time
CNBC call this “Musk’s latest driverless dreams.” Link here for more info.
Bank of Canada business outlook survey says “demand is weak”
- Highlights of the Q3 survey
- Business Outlook Survey indicator remains negative, signaling widespread softness
- ” demand is weak, firms have excess capacity, and price growth continues to slow” but little deterioration since last quarter
- Firms reported weak past sales growth due to past inflation and interest rate increases continuing to weigh on the economy, particularly on consumers’ budgets
- Sales expectations remain softer than average but have improved slightly this quarter on rate cut hopes. Sales growth indicator to +13 from +1
- Labour shortages continue to ease, with few firms reporting challenges
- Investment and hiring intentions remain weak
- Investment spending +9 vs +11 prior
- Wage growth expected to moderate gradually
- Firms anticipate slower growth in input and selling prices
- Inflation expectations within BoC’s target range at all horizons
The Bank of Canada’s Q3 2024 Business Outlook Survey shows that Canadian firms are still facing headwinds, with the BOS indicator remaining in negative territory. While current business conditions remain subdued, there’s a glimmer of hope as future sales expectations showed some improvement.
Canada September employment change +46.7K vs +27.0K expected
- Canada September 2024 employment changes details
- Prior month +22.1K
- Unemployment rate 6.5% vs 6.7% expected
- Prior month employment rate 6.6%
- Full-time employment +112.0K vs -43.6K prior (largest since May 2022)
- Part-time employment -65.3K vs +65.7K prior
- Participation rate 64.9% vs 65.1% prior
- Average hourly wages y/y 4.5% vs 4.9% last month
- Private sector employment +61K
- Public sector employment -24K
Employment rose among youth aged 15 to 24 (+33,000; +1.2%) and core-aged women (25 to 54 years old) (+21,000; +0.3%). The largest segment rise was in culture and recreation industry, which rose by 22,000 jobs matching the rise in wholesale and retail trade.
Commodities
Gold Extends Rally Following Dip in US Consumer Sentiment Index
Gold prices continue their upward trajectory after the Michigan Consumer Sentiment Index reported a decline, indicating weaker consumer sentiment on Friday.
Market Overview:
- Current Price: Trading in the $2,650s
- Gold has rebounded despite earlier inflation data, as weak US jobs data reinforces expectations for further Federal Reserve easing.
Key Economic Indicators: The preliminary Michigan Consumer Sentiment Index fell to 68.9 in October, down from 70.1 in September and below the expected 70.8. This decline reflects growing concerns among consumers, which contributed to gold’s rally.
Meanwhile, the US Producer Price Index (PPI) data revealed mixed results:
- Year-over-Year (YoY): PPI increased by 1.8% in September, surpassing August’s 1.7% and expectations of 1.6%.
- Monthly: Headline PPI showed no change compared to a 0.2% rise in August, falling short of the forecasted 0.1%.
- Core PPI (excludes food and energy): Rose by 2.8% YoY, higher than the 2.4% in August and expectations of 2.7%.
Gold’s Reaction to Jobs Data: Gold prices found support above the critical $2,600 level following a surprising spike in initial jobless claims. In the week ending October 4, claims rose to 258,000, well above the previous week’s 225,000 and the expected 230,000. This rise is attributed in part to the pre-Hurricane Milton exodus from Florida.
The continuing claims also increased to 1.861 million, exceeding both the prior week’s revised figure and the estimates. This data suggests a weakening jobs market, which could encourage the Fed to consider interest rate cuts at its upcoming November meeting.
The market’s anticipation of a 25 basis point (0.25%) rate cut has increased to 89%, while the likelihood of maintaining current rates has dropped to 11%.
Geopolitical Factors: Gold’s appeal as a safe-haven asset may also be bolstered by heightened geopolitical tensions, particularly in the Middle East, where Israel’s military actions against Hezbollah in Lebanon raise concerns over broader conflict.
As gold continues to navigate these economic and geopolitical landscapes, investor sentiment and market dynamics will play critical roles in shaping its trajectory.
Baker Hughes oil rig count up +2 to 481
- The weekly Baker Hughes rig count
- Oil rigs +2 to 481
- Nat Gas rigs -1 to 101
- Total Rigs +1 at 586
Barclays on the risk of $15 jump higher for oil prices
- An Israeli strike on Iranian oil infrastructure would impact global oil markets by shrinking spare capacity and introducing geopolitical risk premiums
Barclays analysts suggest that a potential Israeli strike on Iranian oil production or export infrastructure presents a binary risk to the global oil markets.
Such an event could shrink the current excess in spare capacity, which has been exerting downward pressure on prices, while simultaneously introducing a considerable geopolitical risk premium. This dynamic, they note, has been a key driver behind the recent uptick in oil market volatility.
The bank highlights that a prolonged disruption of 1 million barrels per day (mb/d) in Iranian oil supplies could push prices at least $15 per barrel higher from current levels. However, given the uncertain geopolitical landscape, Barclays remains cautious about assigning a high probability to this outcome.
EU News
Germany September final CPI +1.6% vs +1.6% y/y prelim
- Latest data released by Destatis – 11 October 2024
- Prior +1.9%
- HICP +1.8% vs +1.8% y/y prelim
- Prior +2.0%
UK August monthly GDP +0.2% vs +0.2% m/m expected
- Latest data released by ONS – 11 October 2024
- Prior 0.0%
- GDP +1.0% vs +1.4% y/y expected
- Prior +1.2%; revised to +0.9%
- Services +0.1% vs +0.2% m/m expected
- Industrial output +0.5% vs +0.2% m/m expected
- Manufacturing output +1.1% vs +0.2% m/m expected
- Construction output +0.4% vs +0.4% m/m expected
Asia-Pacific-World News
IKEA calls for more China stimulus as sales slip
- IKEA see consumer confidence in China slightly lower than the global average, but are optimistic that the stimulus package will have a positive impact
Info via Reuters – IKEA calls for more China stimulus as sales slip
- IKEA urges China to deploy further economic stimulus
- China accounted for 3.5% of Ingka Group’s global sales, down from 3.6%
- IKEA opened new Shanghai store in September, now has 39 stores in China
- Price cuts helped boost sales
- China unveiled aggressive monetary stimulus package two weeks ago … IKEA executives “excited” to see impact on home furnishing market
Key quote: “We would like to encourage even more stimulation to the market because the market needs a little extra boost,” – Jesper Brodin, CEO of Ingka Group
PBOC sets USD/ CNY reference rate for today at 7.0731 (vs. estimate at 7.0737)
- PBOC CNY reference rate setting for the trading session ahead.
In open market operations (OMOs):
- PBOC injects 94bn yuan via 7-day RR, sets rate at 1.5%
- 278bn yuan mature today in OMOs
- Net drain of 184bn yuan
China will follow up Saturday’s stimulus briefing with another on Monday
- We’ve already had the news this week that China’s Finance Ministry will hold a press briefing on fiscal policy and economic development on October 12th at 10 am Beijing time:
- 0200 GMT
- 2200 US Eastern time
News that there will be follow up briefing on Monday from China’s Infrastructure Ministry, Ministry of Industry and Information Technology, and State Administration for Market Regulation. At 10 am Beijing time.
Trump’s desire to trash the US dollar could be blocked by the Fed & China
- JP Morgan on how Trump intervention could fail
Bloomberg (gated) cite a note from Michael Feroli, chief US economist at JPMorgan on Trump’s policy desire to weaken the US dollar.
In brief:
- it conflicts with his tariff policy, theory predicts that the currency of a tariff-imposing country should appreciate following higher import duties
- Trump might use the US Treasury’s Exchange Stabilization Fund to influence exchange rates without support from the Federal Reserve or Congress … but intervention is more successful when it appears to have the backing of monetary authorities, and when the move is done in concert with other global central banks … “The elephant in the room is China,” Feroli wrote. “One obvious problem with this policy of countervailing currency intervention against China is that China maintains capital controls such that any potential intervention by the US would need to be undertaken in the offshore CNH market.”
Here is the link to the Bloomberg piece for more if you can access it.
New Zealand food price index +0.5% m/m in September (prior +0.2%)
- NZ FPI
New Zealand manufacturing PMI for September improves to a still dire 46.9 (prior 46.1)
- Business NZ Manufacturing PMI
Business NZ Manufacturing PMI
Comes in at 46.9 for September 2024, thus remaining in contraction
- up for a third consecutive month and to its highest since April this year
- prior revised a touch higher to 46.1
BNZ’s Senior Economist Doug Steel:
- “while all sub-indices remain well below their historical average, four of the five series have moved closer to breakeven in the last three months since June”
Singapore’s central bank meets Monday, expected to maintain steady policy
- In Singapore, the key monetary policy tool is its exchange rate policy – not interest rates
The Monetary Authority of Singapore (MAS) is the country’s central bank.
Its policy meeting is on Monday, October 14.
MAS is expected to hold policy steady:
- 9 out of 10 analysts polled by Reuters expect MAS to keep policy unchanged at April 15 meeting
- Inflation remains sticky at 2.7% y/y in August, down from 5.5% peak in early 2023
- GDP growth rebounded to 2.9% y/y in Q2 2024, prompting upgraded forecasts
- Geopolitical tensions and extreme weather keeping food and oil prices elevated
- Most analysts see potential easing pushed to 2025 as MAS waits for a clearer inflation picture
- Some analysts point to the falling SORA (Singapore Overnight Rate Average) interest rate alongside the US rate cuts, which can be seen as a de-facto easing.
- UOB is the sole outlier expecting slight S$NEER slope reduction next week
- MAS last tightened policy in October 2022, its 5th consecutive hike
Bank of Korea rate cut as expected, base rate to 3.25% from 3.5%
- Bank of Korea 25bp rate cut
- expected 3.25%, prior 3.50%
More now from the Bank:
- The Bank of Korea will thoroughly assess trade-offs among inflation, growth, and financial stability.
- The South Korean economy is expected to continue moderate growth.
- The Bank of Korea will carefully determine the pace of further cuts to the base rate.
- Uncertainties to the growth path are higher compared to August.
- Domestic consumption recovery has been delayed.
- It is still important to remain cautious of risks such as the impact of rate cuts on household debt.
- South Korea’s 2025 inflation forecast is expected to be consistent with earlier projections.
- Oil price changes and Middle East risks add uncertainties to inflation.
- Housing prices and household debt growth are anticipated to gradually slow.
- Growth in household loans has shrunk.
Cryptocurrency News
Ethereum Recovers $2,395 Support Amid Inflationary Concerns with Unichain’s Launch
Ethereum has successfully reclaimed the $2,395 support level but faces potential challenges ahead as it approaches the $2,490 resistance.
Market Overview:
- Current Price: $2,395
- Ethereum could encounter inflationary pressures following the launch of Uniswap’s Layer 2 network, Unichain.
Impact of Unichain: The anticipated launch of Unichain, announced by Uniswap Labs, is expected to enhance transaction speed, reduce costs, and improve cross-chain liquidity. However, concerns have arisen within the Ethereum community regarding Unichain’s potential impact on the Ethereum main chain’s revenue and the deflationary narrative of ETH.
Since the Dencun upgrade in March, Ethereum’s Layer 1 (L1) revenue has plummeted by approximately 300%, dropping from 35.07K ETH to 8.69K ETH, according to DefiLlama data. This significant decline in revenue has led to a reduction in fees captured by L1 and total ETH burnt.
Inflationary Risks: The introduction of Unichain may exacerbate inflationary pressures on ETH, which has already seen its supply increase by over 300K ETH, leading to an annual inflation rate of 0.7% since the upgrade. Uniswap accounts for a significant portion of L1 revenue, with over 90% of its cumulative fees generated on the main Ethereum chain. If a substantial amount of trading activity shifts to Unichain, this could adversely affect ETH’s revenue growth and contribute to increased supply inflation.
ETF Inflows Amid Price Decline: Despite recent price declines, Ethereum ETFs saw net inflows of $10.1 million on Thursday. Notably, BlackRock’s ETHA ETF attracted $17.8 million in inflows, while Fidelity’s FETH and Bitwise’s ETHW experienced outflows of $3.5 million and $4.2 million, respectively.
Ethereum’s future trajectory will depend on how these dynamics evolve, particularly with Unichain’s imminent launch potentially reshaping the landscape for Ethereum and its tokenomics.
XRP Steady Above $0.53 as Ripple Advances Legal Strategy Against SEC
XRP remains resilient above the $0.53 mark as Ripple announces a cross-appeal in its ongoing legal tussle with the SEC.
Market Overview:
- XRP Price: $0.5370
- XRP has recovered nearly 5% following recent declines, buoyed by Ripple’s confirmation of its cross-appeal against the SEC’s challenge to a prior ruling.
Ripple’s Legal Developments: Ripple is actively pursuing a cross-appeal regarding the SEC’s contest of the decision in their four-year legal battle, where Ripple was fined $125 million for institutional sales of XRP. Ripple’s Chief Legal Officer, Stuart Alderoty, emphasized that the SEC’s appeal does not alter XRP’s legal status.
Market Sentiment: Positive sentiment is emerging among XRP holders, bolstered by Ripple’s legal maneuvers. The overall social sentiment appears optimistic, and the Fear & Greed Index on CFGI.io reflects a neutral outlook.
Bitnomial’s Lawsuit: In a related development, derivatives exchange Bitnomial has filed a lawsuit against the SEC, accusing the regulator of overreach and lack of clarity regarding XRP’s classification as a security.
Ripple’s proactive legal stance and market resilience contribute to a cautiously optimistic atmosphere around XRP as it continues to hold key support levels.
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