Round up of today's market news *

North American News

US Equity Markets Decline as Chipmakers and China Stocks Weigh Heavily

US equity markets experienced a downturn today, with the S&P 500 falling 0.8%, the Nasdaq Composite down 1.2%, and the Dow Jones Industrial Average losing 324.80 points to close at 42,740.42. The market was primarily impacted by disappointing guidance from semiconductor equipment maker ASML, alongside weakness in Chinese stocks, leading to a broad-based selloff.

Market Performance Summary:

Dow Jones: -324.80 points at 42,740.42
Nasdaq Composite: -187.10 points at 18,315.59
S&P 500: -44.59 points at 5,815.26
Russell 2000: +0.1% gain, showcasing some resilience

Key Drivers of Market Movement:

ASML’s Disappointing Results: Shares of ASML plummeted 17% following the early release of its Q3 results, which fell short of expectations with below-consensus EPS, revenues, and net bookings. The company also provided weaker-than-expected FY25 revenue guidance, indicating challenges in market recovery despite positive developments in AI.
Chipmaker Impact: The selloff spread to major chipmakers like Nvidia and AMD, which saw declines of 5% and 4.5%, respectively. The Philadelphia Semiconductor Index dropped 5.3%, reflecting overall sector weakness exacerbated by a report that the Biden administration may limit sales of advanced AI chips to certain countries.
Chinese Stocks Under Pressure: Chinese tech stocks also faced selling pressure, with JD.com down 9% and Baidu down 5%, contributing to the broader market’s decline.

Sector Performance:

Healthcare Sector Weakness: The health care sector fell 1.2%, driven by losses in UnitedHealth, which declined 8.1% following its earnings report. Other healthcare stocks were also negatively impacted.
Mixed Financial Sector Results: Despite mixed earnings from Goldman Sachs, Bank of America, and Citigroup, the financial sector managed to close 0.3% higher, showing resilience in the face of earnings variability.

Economic Data and Upcoming Events:

The 10-year yield settled three basis points lower at 4.04%, while the 2-year yield rose one basis point to 3.95%.
Today’s economic data included the October NY Fed Empire State Manufacturing Index, which dropped to -11.9 from 11.5 previously.
Looking ahead, key economic reports scheduled for tomorrow include the MBA Mortgage Applications Index, September Import Prices, and EIA Crude Oil Inventories.

Despite today’s losses, the year-to-date performance remains strong, with the Nasdaq Composite up 22.0%, S&P 500 up 21.9%, and other indices also reflecting positive gains for the year.

NY Fed survey: Credit delinquency expectations rise to highest since April 2020

New York Fed consumer expectations survey

One year inflation unchanged at 3.0%
Three-year inflation 2.7% vs 2.5% prior
Five year inflation 2.9% vs 2.8%
Credit delinquency expectations rise to highest since April 2020
Perceived probability of losing job unchanged at 13%
Median home price rise 3.0% vs 3.1% prior
Expected year-ahead spending and income growth unchanged
Expected earnings growth dipped to 2.8% from 2.9%

September Empire Fed -11.9 vs +3.85 expected

The September 2024 New York Fed manufacturing index

Empire Fed -11.9 vs +11.5 prior

Details:

New orders: -10.2 vs +9.4 prior
Shipments: -2.7 vs +17.9 prior
Unfilled orders: -2.2 vs +2.1 prior
Delivery times: -3.2 vs -1.1 prior
Inventories: -7.5 vs 0.0 prior
Prices paid: 29.0 vs 23.2 prior
Prices received: 10.8 vs 7.4 prior
Employment: 4.1 vs -5.7 prior
Average employee workweek: 4.7 vs 2.9 prior
Supply availability: -7.5 vs -2.1 prior

Six-month ahead expectations:

General business conditions: 38.7 vs 30.6 prior
New orders: 38.4 vs 39.9 prior
Capital expenditures: 9.7 vs -2.1 prior

Fed’s Daly: If forecast met, I see one or two rate cuts this year

Comments from the San Francisco Fed President at an event in New York

Monetary policy is still restrictive and working to lower inflation
Continued progress on Fed goals not assured, Fed must remain vigilant
Fed must deliver on 2% inflation while keeping job market at full employment
A continued expansion remains very possible
Labor market has cooled, largely normalized
Economy is clearly in a better place, inflation has eased a lot
Fully expects economy to see bumps, disturbances and scares
Job to achieve a soft landing is not complete
Is cautiously optimistic about growth
Fed has been able to get inflation down without a major disruption
Inflation retreat has been broad-based
Fed funds rate is a long way from where it’s likely to settle
3% rate may be around neutral
Neutral rate is higher than what it once was
Lack of dissents don’t mean Fed officials fully agree
Inflation points are likely to cause more dissents
If forecast met, she sees one or two rate cuts this year
“Las Vegas is a very good bellwether for where consumer spending is,” and if it slows, that’s something to pay attention to.

Fed’s Kashari says a lot of progress made on inflation, labor market is strong

Minneapolis Fed President Neel Kashkari:

a lot of progress made on inflation, labor market is strong
Not worth it to have the unemployment rate shoot higher
Don’t think China is remotely competitive with us
Not at all worried the yuan could replace the US dollar as global reserve currency

Nassim Taleb warns that markets are more vulnerable now than in the past 20-30 years

Taleb is ‘Black Swan’ author

Taleb spoke with Bloomberg TV ICYMI

warns of fragile markets, compares AI boom to dot-com era
Markets more vulnerable now than in past 20-30 years, says “Black Swan” author
Current AI leaders may not dominate future landscape, drawing parallels to early internet firms
Gold price surge noted, but Taleb stresses importance of broader hedging strategies

Key points:

Market fragility: Taleb sees heightened risks, likening current conditions to pre-crash periods
AI investments: While promising, today’s leaders may not maintain dominance (think AltaVista vs Google)
Risk management: Focus on hedging against major downturns rather than relying on specific assets like gold

BBG: US weighs capping AI chip sales from Nvidia, AMD, other US firms to some countries

Bloomberg with the info on the latest chip sales restrictions being considered

This would have the effect of slowing AI development in targeted countries.

Talks are in the early stages still.

ceiling on export licenses for certain countries in the interest of national security
focused on Persian Gulf countries

Five reasons why US inflation risks are still rising

A separate piece from Deutsche Bank says not to ignore the risk of higher inflation, outlining five reasons this is rising:

Central banks have implemented more aggressive short-term monetary easing than anticipated.
Commodity prices are rising due to China’s stimulus measures and ongoing tensions in the Middle East.
U.S. economic data remains solid, suggesting the economy may avoid a more severe downturn.
The September CPI report exceeded expectations, showing stronger inflation.
Money supply growth is picking up pace.

CIBC now sees the Bank of Canada cutting rates by 50 basis points

CIBC makes the change after the inflation report

The Canadian dollar is on track for a tenth day of declines today and the selling was helped out by CPI at 1.6% y/y compared to 1.8% expected.

CIBC highlights a big reason why:

“Excluding mortgage interest costs, which are still picking up the effects of past interest rate hikes and which most countries exclude from their inflation targets, CPI would have been a mere 1.0% year-over-year in September.”

They also note that clothing prices and goods in general are sources of deflation.

Headline inflation may perk up a bit in the months ahead due to higher gasoline prices so far in October, and may even rise back above 2% briefly in early 2025. However, core measures of inflation should continue to decelerate given evidence of slack in the economy, and we think that there’s plenty of room for the Bank of Canada to cut interest rates and accelerate growth to prevent an undershoot of the 2% inflation target next year. We now forecast a 50bp cut at the October meeting, and continue to predict an overnight rate of 2.25% by mid-2025.

The next BOC decision is on October 23.

Canadian Real Estate Association downgrades 2024 forecast

Not much help coming for Canadian housing

CREA now expects 468,900 properties to change hands in 2024
- That’s up 5.2% from 2023
- But down from July forecast of 6.1% increase
- and way down from April forecast of 10.5% increase
Average home price forecast for 2024:
- Now expecting 0.9% annual increase to $683,200
- Previous outlook was 2.5% annual increase
September data:
- Average home price: $669,630 (up 2.1% y/y)
- Sales up 6.9% y/y, but only 1.9% m/m
- New listings up 4.9% m/m
2025 forecast:
- Home sales expected to climb 6.6%
- Average home prices forecast to rise 4.4% to $713,375

Canada September CPI 1.6% vs 1.8% expected

Canada September 2024 inflation data

Prior was 2.0%

CPI m/m -0.4 vs -0.2% expected
Prior m/m +0.4%

Core measures

CPI Bank of Canada core y/y 1.6% vs 1.5% prior
CPI Bank of Canada core m/m 0.0% versus -0.1% prior
Core CPI m/m SA +0.1% vs +0.1% prior (revised to +0.2%)
Median 2.3% versus 2.3% prior
Trim 2.4% versus 2.5% prior
Common 2.1% versus 2.0% prior

Commodities

WTI crude oil falls 4%

WTI crude oil down $3.18 to $70.65

WTI crude oil fell $3.13 to $70.71 today, giving up most of its recent gains and briefly trading below $70.

For the next move in oil, I think we will have to wait for the dust to settle in the Middle East. Aside from that, the focus will be on China and the potential for stimulus. Today, Chinese stocks fell 3-4% on the failure to deliver for the real economy and that certainly isn’t helping crude.

Chinese crude oil imports remained weak also in September – Commerzbank

China’s crude oil imports fell to 11.1 million barrels per day in September, according to customs data, Commerzbank’s FX analyst Carsten Fritsch notes.

September data for crude oil processing signals subdued China oil demand

“This was the fifth consecutive month that imports were lower than the previous year’s level. There was also a decline compared to the previous month, meaning that the monthly increase in August to 11.6 million barrels per day did not mark the beginning of a recovery. In the first nine months of the current year, China’s crude oil imports averaged 11 million barrels per day.”

“This is a good 3% lower than in the corresponding period of the previous year. In the remaining three months, there would have to be a significant pick-up in imports to prevent the looming annual decline. To achieve this, imports between October and December would have to exceed 12 million barrels per day, which seems unrealistic.”

“Most recently, Chinese crude oil imports fell in 2021 and 2022 due to the impact of the coronavirus pandemic. This time, weak demand for diesel and gasoline is weighing on crude oil processing at refineries, which are therefore importing less crude oil. Therefore, the data for crude oil processing in September are not expected to be much better on Friday, signaling subdued oil demand in China.”

IEA cuts 2024 oil demand growth forecast amid China’s stumble

The agency sees surplus looming in the oil market

2024 world oil demand growth forecast seen at 860k bpd (previously 900k bpd)
China demand seen only rising by 150k bpd in 2024
2025 world oil demand growth forecast seen at 1 mil bpd (previously 950k bpd)

IEA notes that “in the absence of a major disruption, the oil market is faced with a sizeable surplus in the new year”.

China imported more Copper and large quantities of Copper ore again in September – Commerzbank

China imported 479,000 tons of unwrought Copper and Copper products in September, according to the General Administration of Customs on Monday, Commerzbank’s commodity analyst Carsten Fritsch notes.

Copper imports can be lower in the coming months

“This was a good 15% more than in the previous month. Imports were thus roughly at the previous year’s level. The increase in imports is likely to have been in anticipation of stronger demand in the autumn. Whether this occurs or not will depend in part on the success of the monetary policy and fiscal policy stimulus measures that have already been implemented or announced.”

“Year to date, Copper imports are up 2.6% y-o-y. Imports of Copper concentrate in September were 2.44 million tons. This was slightly lower than in the previous month, when the second-highest level since the beginning of the data series was recorded, but almost 9% higher than in the previous year.”

“Imports in the first nine months of the year are 3.7% higher than in the same period of the previous year. The latest data suggest that the supply of Copper ore is improving, which would argue against significant cuts in Copper production in China. This is another reason why Copper imports could be lower in the coming months, which would argue against a rising Copper price.”

ICYMI: Citi Brent base case is average as low as $65, but Mid East trouble could see $120

Via the Wall Street Journal overnight

The Wall Street Journal is gated, but here is the link if you can access it:

Citi Sees Possibility of $120 Oil if Supplies Are Disrupted

In (very brief) summary:

base case is for Brent to average $74 a barrel in Q4 & $65 in Q1 2025
“owing to weak underlying oil market fundamentals.”
bull-case estimate $120 (probability of 20%) “based on supply fears and disruptions similar in magnitude and duration to that which occurred during 2022”
bear-case scenario includes OPEC+ starting to raise production in December and a decline in supply risks, Brent $60Q4, & $55 in Q1 2025

EU News

European equity close: DAX touches a new high then gives it back

Closing changes in Europe:

Stoxx 600 -0.7%
German DAX flat
France CAC -0.9%
UK FTSE 100 -0.4%
Spain IBEX +0.9%
Italy’s FTSE MIB -0.1%

Eurozone August industrial production +1.8% vs +1.7% m/m expected

Latest data released by Eurostat – 15 October 2024
Prior -0.3%; revised to -0.5%

Looking at the details, there were increases in production for energy (+0.4%), capital goods (+3.7%), durable consumer goods (+1.7%), and non-durable consumer goods (+0.2%). The only decrease was for the production of intermediate goods (-0.3%).

Germany October ZEW survey current conditions -86.9 vs -84.5 expected

Latest data released by ZEW – 15 October 2024

Prior -84.5
Economic sentiment 13.1 vs 10.0 expected
Prior 3.6

Germany September wholesale price index -0.3% vs -0.8% m/m prior

Latest data released by Destatis – 15 October 2024

German wholesale prices fell once more as prices in wholesale trade in mineral oil products declined sharply again, down 4.5% on the month. At the balance, wholesale prices are down 1.6% relative to a year ago but owes much to the above development as well.

France September final CPI +1.1% vs +1.2% y/y prelim

Latest data released by INSEE – 15 October 2024

Prior +1.8%
HICP +1.4% vs +1.5% y/y prelim
Prior +2.2%

Spain September final CPI +1.5% vs +1.5% y/y prelim

Latest data released by INE – 15 October 2024

Prior +2.3%
HICP +1.7% vs +1.7% y/y prelim
Prior +2.4%

UK August ILO unemployment rate 4.0% vs 4.1% expected

Latest data released by ONS – 15 October 2024

Prior 4.1%
Employment change 373k vs 250k expected
Prior 265k
Average weekly earnings +3.8% vs +3.7% 3m/y expected
Prior +4.0%; revised to +4.1%
Average weekly earnings (ex bonus) +4.9% vs +4.9% 3m/y expected
Prior +5.1%
September payrolls change -15k
Prior -59k; revised to -35k

Asia-Pacific-World News

China’s housing ministry, MOF and PBoC are to hold a briefing on Thursday

China to hold press conference on promoting steady and healthy development of property sector on October 17 at 10 am Beijing time.

China’s economy set to miss growth target in 2024 – Reuters poll

The findings from Reuters’ latest poll on economists on the Chinese economy

China Q3 GDP seen at +1.0% q/q
China Q3 GDP seen at +4.5% y/y
China 2024 GDP growth seen at 4.8% (previously 5.0% in July poll)
China 2025 GDP growth seen at 4.5%

China banks reportedly set to trim rates on ¥300 trillion of deposits as soon as this week

Bloomberg reports on the matter

It is reported that the rates on one-year time deposits may drop by at least 20 bps while those for longer tenors may come down by at least 25 bps. The Chinese banks will be guided by the PBOC’s interest rate self-disciplinary mechanism to lower rates on a number of deposit products.

For some context, commercial banks in China do have some control over setting their own rates but are “guided” by a ceiling and floor that is set by the PBOC’s interest rate self-disciplinary body. In any case, the moves here are a follow up after China announced a sweeping package at the end of last month to cut mortgage rates.

PBOC sets USD/ CNY reference rate for today at 7.0830 (vs. estimate at 7.0840)

PBOC CNY reference rate setting for the trading session ahead.

In open market operations (OMOs):

PBOC injects 68bn yuan via 7-day RR, sets rate at 1.5%
42bn mature today
net injection 26bn

China has begun enforcing a tax on overseas investment gains by the country’s ultra-rich

Bloomberg (gated) conveying the information, citing unnamed ” people familiar with the matter”.

China has begun enforcing a long-overlooked tax on overseas investment gains by the country’s ultra-rich
up to 20% levies on investment gains

Says the report on those targeted:

had at least $10 million in offshore assets
others were shareholders of companies listed in Hong Kong and the US

Chinese state media report on Goldman Sachs raising its forecast for China economic growth

4.9% for this year, 4.7% the next

GS cited in Xinhua:

“The latest round of China stimulus clearly indicates that policymakers have made a turn on cyclical policy management and increased their focus on the economy”

ICYMI – China’s exports grow at their slowest pace in 5 months in September

The undershoot for imports is a confirmation of poor domestic demand

CIYMI, trade data from China for September was not positive.

export growth significantly slowed in September, while imports also decelerated, missing forecasts. This suggests manufacturers are reducing prices to clear inventory ahead of tariffs from key trade partners.
Export growth, previously a strong point for China’s economy, is losing momentum. This is adding to weak domestic demand and a property market debt crisis, highlighting the need for stronger economic stimulus.
In September, exports grew 2.4% year-on-year, the slowest since April, well below the expected 6% increase. Prior was 8.7%.
Imports grew only 0.3%, missing the 0.9% forecast. Prior was +0.5%.
China’s trade surplus shrank to $81.71 billion from $91.02 billion in August.
Growing trade barriers, particularly from the EU, U.S., and Canada, are expected to further constrain China’s export growth.

New Zealand GDT price index -0.3%

New Zealand dairy prices slightly lower

GDT price index -0.3%
Whole milk powder 0.0%

The latest Australian weekly survey of Consumer Confidence virtually unchanged

ANZ-Roy Morgan Consumer Confidence 83.4 (prior 83.3)

ANZ-Roy Morgan Consumer Confidence this week is 83.4

prior 83.3

ANZ comment:

The 4-week moving average of the short- and medium-term economic confidence subindices rose to a 6-month high.

BOJ seen keeping interest rates unchanged through year-end – poll

The latest from Reuters’ poll on economists on the BOJ

25 of 49 (51%) economists expect the BOJ to keep rates unchanged through year-end
The previous poll showed 46% of economists expecting rates to be unchanged
39 of 45 (87%) economists expect the BOJ to raise rates by 25 bps by end of March 2025

Cryptocurrency News

Bitcoin Surges Above $67,000 Amid Record Inflows and Growing Optimism

Bitcoin is trading at $67,000 today, marking a significant milestone as it extends gains following a 5% rally on Monday. This surge is fueled by impressive inflows into US Bitcoin Spot Exchange Traded Funds (ETFs), with $555.90 million recorded on Monday—the highest single-day total since June 4.

Market Highlights:

Institutional demand for Bitcoin is on the rise, as evidenced by the substantial ETF inflows. These figures suggest a robust interest from institutional investors, which could signal further price increases if the trend continues.
Ki Young Ju, founder and CEO of CryptoQuant, points to a rebound in Bitcoin’s apparent demand, reinforcing a bullish outlook for the cryptocurrency.
Apparent demand is determined by the difference between Bitcoin production (mining issuance) and inventory changes (supply inactive for over a year). A decline in inventory exceeding production indicates increasing demand, a positive sign for Bitcoin’s market.

Optimism and Technical Outlook:

A report from QCP Capital highlights various factors contributing to Bitcoin’s bullish momentum, including potential election-driven enthusiasm linked to Trump’s lead in prediction markets and Kamala Harris’s recent pledge for a crypto regulatory framework, signaling a friendlier approach to the industry.
Furthermore, China’s recent stimulus measures may be prompting investors to reallocate funds from Chinese equities to Bitcoin, while delays in Mt. Gox repayments have alleviated concerns about potential supply overhangs.
Geopolitical factors are also at play, with reports suggesting that Israel may avoid direct targeting of Iran’s oil and nuclear facilities, thereby reducing geopolitical tensions that could impact market sentiment.

Technical Indicators:

The current Bitcoin chart shows promising momentum with minimal resistance ahead of the $70,000 mark, indicating potential for further gains in the near future.

Overall, the confluence of strong institutional demand, positive market sentiment, and favorable technical indicators positions Bitcoin for an optimistic outlook as it breaks above $67,000.

XRP Climbs Above $0.54 Following Ripple’s Key Announcements at Swell

XRP is trading at $0.5420 on Tuesday, showing resilience as Ripple makes significant announcements regarding its stablecoin project during the Swell event in Miami. With these developments, XRP could potentially rally toward the psychologically important price level of $0.60.

Market Updates:

Ripple has disclosed its exchange partners for the stablecoin RLUSD, which is nearing its launch pending regulatory approval. Key partners include Uphold, BitStamp, Bitso, Moonpay, Indereserve, CoinMENA, and Bullish.
Monica Long, President of Ripple Labs, stated that the RLUSD stablecoin is “operationally ready” and is awaiting final approval from the New York Department of Financial Services (NYDFS).
Ripple has not yet provided a specific launch date for RLUSD, which keeps the market on alert for further updates.

Strategic Moves:

To strengthen its position, Ripple has appointed former FDIC chair Sheila Bair and ex-CEO of Centre David Puth to its team. Centre is recognized for setting standards for USD Coin (USDC), which adds credibility to Ripple’s ambitions in the stablecoin sector.

As XRP holds above the critical support level of $0.54, market sentiment appears bullish, with traders anticipating further gains as Ripple advances its stablecoin initiatives.

Fed’s Kashari says Bitcoin has been around a dozen years and its still useless

Minneapolis Fed President Neel Kashkari (not a BTC fan)

Bitcoin has been around a dozen years and its still useless
Generative Artificial Intelligence, after two years, looks to have real potential

US Vice President Harris to soften stance on crypto regulation in speech Monday

Harris is speaking at a campaign event in Western Pennsylvania on Monday evening, US time.

Via Condesk:

Harris will announce support for a “regulatory framework for cryptocurrency and other digital assets”
will announce a a regulatory framework so that those who participate in the market are protected

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Round up of today’s market news

ByBilals Tech