Round up of today's market news *

North American News

US Stocks Rebound, Dow Leads with Strong Gains While Tech Struggles

US stocks rebounded today, recovering from yesterday’s steep losses. The Dow Jones Industrial Average surged 337.28 points, or 0.79%, closing at 43,077.70, effectively erasing yesterday’s decline of 324.80 points.

In contrast, the S&P 500 and Nasdaq indices saw more modest recoveries. The S&P 500 fell 44.59 points, or 0.76%, yesterday but rose 27.21 points, or 0.47%, today, closing at 5,842.47. The Nasdaq also struggled to regain strength, having dropped 187.10 points, or 1.01%, yesterday, but clawed back 51.49 points, or 0.28%, today, closing at 18,367.08. The small-cap Russell 2000 showed more robust performance, gaining 36.85 points, or 1.64%, to close at 2,286.67, building on a slight gain from the previous day.

Notable Winners:

Trump Media & Technology Group: +15.52%
Aspen Aerogels Inc: +13.30%
United Airlines Holdings: +12.44%
American Airlines: +7.15%
Delta Air Lines: +6.77%
Morgan Stanley: +6.49%
Micron: +4.72%
Cisco: +4.25%
Papa John’s: +4.11%
NVIDIA: +3.13%
Visa A: +2.94%
Walt Disney: +2.69%

Key Losers:

Snowflake: -3.12%
Lam Research: -2.91%
Snap: -2.72%
Nio A ADR: -1.89%
Meta Platforms: -1.65%
Uber Technologies: -1.56%
Intel: -1.54%
Qualcomm: -1.51%
Intuit: -1.39%
SoFi Technologies: -1.38%
Biogen: -1.33%
Palantir: -1.25%
Chipotle Mexican Grill: -1.18%
Target: -1.13%
Celsius: -1.11%

Overall, the market sentiment improved today, led by strong gains in the Dow, while technology stocks faced headwinds as investors digested mixed performance across various sectors.

US September import prices -0.4% versus -0.2% estimate

US import and export prices for September 2024

Prior month import prices -0.3% revised to -0.2%
US import prices MoM -0.4% versus -0.2% expected
US export prices MoM -0.7% versus -0.4% expected
Previous export prices revised to -0.9% from -0.7%
Import prices year on year -0.1% which was the first 12 month drop since February 2024
Export prices fell -2.1% year over year. That was the largest 12- month increase since January 2024.

US MBA mortgage applications W.E. 11 October -17.0% vs -5.1% prior

Latest data from the Mortgage Bankers Association for the week ending 11 October 2024

Prior -5.1%
Market index 230.2 vs 277.5 prior
Purchase index 138.4 vs 149.2 prior
Refinance index 734.6 vs 997.3 prior
30-year mortgage rate 6.52% vs 6.36% prior

Fed’s Bostic: US economy performing quite well, confident inflation will get to 2% target

Federal Reserve Bank of Atlanta President Raphael Bostic

US economy performing quite well
Fairly confident inflation will get to 2% target
I don’t have a recession in my outlook
Expects inflation to be choppy, and employment to remain robust
My dot was 25bp more in 2024 beyond the September 50 bp cut
I am keeping my options open

AI adoption in trading applications is accelerating

Could lead to greater volatility in times of stress

The International Monetary Fund (IMF) have published a piece that is interesting. On the increasing role AI will play in trading.

Hedge funds, investment banks, and others have been using quantitative trading strategies for decades. Automated trading algorithms have helped markets move faster and digest large trades more efficiently in major asset classes such as US equities. But they have also contributed to “flash crash” events when market prices have swung wildly in very short periods of time—such as in May 2010 when US stock prices collapsed only to rebound minutes later—and there are fears they could destabilize markets in times of severe stress and uncertainty. Artificial intelligence, through its ability to almost instantly process large amounts of data and even text for use by traders, is poised to take these kinds of changes to another level.

In summary:

IMF’s Global Financial Stability Report examines AI adoption in financial markets
AI expected to boost market efficiency but could increase opacity and manipulation risks
Patent filings show surge in AI-related algorithmic trading tech since 2017
AI-driven ETFs show higher turnover, potentially deepening liquidity but also herd behavior
Markets may react faster to news, e.g., quicker price moves after Fed minutes release
Nonbanks (hedge funds, prop trading firms) have advantage in AI adoption
Regulators urged to enhance oversight, especially of nonbanks
New volatility safeguards may be needed to prevent AI-driven “flash crashes”

Canadian cardholder spending data “nothing short of abysmal” in latest RBC report

RBC Canadian consumer spending tracker points to a worsening outlook

The report says Canadian consumers “are tapped out”:

Retail sales likely declined in September, both nominally and after inflation adjustment
Q3 marks first quarter since early 2021 that services sector spending has weakened
Per capita retail spending “nothing short of abysmal” – declined in 7 of past 9 quarters
Overall sales buffered by rapid population expansion

Details:

Saw a “significant pullback” in clothing and footwear spending after August back-to-school surge
Car sales moderated after strong summer
Essential spending (groceries, gas) weakened
Dining out frequency decreased in August and September
Travel spending provided some offset, but hotel spending was below year-ago levels

Comments in the report from Carrie Freestone:

Interest rates have been adjusted lower, but debt-servicing ratios are still high with households playing catch-up from previous rate hikes over the past two years. Interest rates are at high levels, and it will take some time before Canadian consumers feel a significant incentive to ramp up discretionary spending

Canada September housing starts 223.8K vs 237.5K expected

Canadian September 2024 housing starts
Prior was 217.4 (revised to 213.0K)

Canada August manufacturing sales -1.3% vs -1.5% expected

Canadian Aug 2024 manufacturing sales data – Sales at the lowest level since Jan 2022

Sales at the lowest level since Jan 2022
Prior was +1.4%
Manufacturing sales dropped 1.3% to C$69.4 billion in August
Primary metals (-6.4%) and petroleum/coal products (-3.7%) led declines
Sales down 4.4% year-over-year
Sales in constant dollars fell 0.8%

Key Details:

Eighth straight month of y/y declines for manufacturing sector
Primary metals hit by weaker domestic and international demand
Petroleum products affected by global economic concerns, especially in China
Aerospace production rose 7.3%, hitting second highest level on record
Sales fell in 8 out of 10 provinces, led by Alberta (-3.3%) and Ontario (-0.6%)

Commodities

Gold Surges amid stronger risk sentiment, Eyeing the $2,700 Mark

Gold prices have surged amid, trading at $2,674, up 0.46%. This rally comes as traders anticipate rate cuts from major central banks, with the European Central Bank (ECB) expected to announce actions on October 17 in light of cooling inflation.

Key Drivers of Gold’s Rise:

Geopolitical Uncertainty: Ongoing geopolitical tensions and uncertainty surrounding the upcoming US elections have fueled demand for gold as a safe-haven asset. Analysts from UBS note, “We anticipate uncertainty and volatility to rise until the next US administration is settled,” emphasizing gold’s role as an effective portfolio hedge.

Market Sentiment: The sentiment in the markets has shown improvement, reflected by three of the four US equity indices trading in the green. While gold reached a year-to-date high of $2,685, it has struggled to breach the significant $2,700 level due to overall strength in the US dollar.

Anticipated Economic Developments: Traders are closely watching the CME FedWatch tool, which indicates a 96% probability of a 25-basis-point rate cut in November. Economic data releases for US Retail Sales, Industrial Production, and Initial Jobless Claims are expected later this week, which could further influence gold prices.

Overall, while gold’s rally has been impressive, the strengthening US dollar, currently up 0.34% at 103.57, poses a challenge for pushing prices toward the $2,700 mark.

Crude oil settled at $70.39

Down -$0.19 or -0.27%

Crude oil futures are settling at $70.39. That’s down $0.19 or -0.27%. The high price today reached $71.31. The low price was at $69.64.

Technically, the price will below a swing area between $71.44 and $72.43 yesterday and stayed below that area today. It would take a move above both to disappoint sellers, and potentially lead to a rotation back to the upside.

Oil private survey of inventory shows a headline crude oil draw bigger than expected

This is from the privately surveyed oil stock data

API Inventory
Crude oil -1.580 million (+3.2 exp)
Gasoline -5.926 million
Distillates -2.672 million
Cushing +410,000

Silver Surges as Bulls Target $32.00

Silver prices have climbed to $31.74, reflecting stronger risk sentiment in the market and a positive shift in momentum. The precious metal gained over 0.85% on Wednesday, reaching a seven-day high of $32.17.

Key Market Drivers:

Improved Risk Appetite: An uptick in overall market risk appetite has bolstered the precious metals sector, providing support for silver prices.
Technical Indicators: The Relative Strength Index (RSI) has cleared key resistance levels, indicating further upside potential toward the target of $33.00.

Technical Outlook:

After a sharp decline from a year-to-date peak of $32.95 to a low of $30.12 within just three days, silver has shown signs of recovery. The momentum is constructive, suggesting that bulls are gaining control.
Support and Resistance Levels: Key support for silver lies at $31.60. A break below this level could lead to a retest of $30.76. Conversely, the first resistance level to watch is $32.00, followed by the high of $32.17. If these levels are surpassed, the next targets would be the May 20 swing high at $32.51 and the year-to-date high of $32.95.

Overall, the market sentiment and technical indicators favor silver bulls as they look to push prices higher in the coming sessions.

EU News

European equities closes mixed

Closing changes in the major European exchanges

Stoxx 600 -0.1%
German DAX -0.2%
France CAC -0.4%
UK FTSE 100 +1.0%
Spain IBEX +0.7%
Italy’s FTSE MIB +0.3%

UK September CPI +1.7% vs +1.9% y/y expected

Latest data released by ONS – 16 October 2024

Prior +2.2%
Core CPI +3.2% vs +3.4% y/y expected
Prior +3.6%

Italy September final CPI +0.7% vs +0.7% y/y prelim

Latest data released by Istat – 16 October 2024

Prior +1.1%
HICP +0.7% vs +0.8% y/y prelim
Prior +1.2%

Asia-Pacific-World News

BOJ governor Ueda to visit China later this week

He will be visiting on 17-18 October

This will be to attend a meeting of central bank governors between Japan, China, and South Korea. This is a common exercise between the three that typically takes place once a year. It is meant as a regular exchange of views on “regional economic and financial developments as well as topics of common interest concerning central banking”, which began back in 2009.

China President Xi only has 2 objectives: Bail out local govt debt, prop up stock market

Near-term goal isn’t to massively stimulate demand

This is a very interesting piece in the Wall Street Journal, arguing that the ‘stimulus’ from China has very limited goals:

According to officials and government advisers close to decision-making, (Xi) wanted to bail out indebted Chinese municipalities on the brink of collapse and revive the stock market without veering too far from his focus on letting the state drive China’s transformation into an industrial and technological powerhouse
the near-term goal isn’t to massively stimulate demand but to fend off a brewing financial crisis

Here is the link to the Journal (gated): Behind Xi Jinping’s Pivot on Broad China Stimulus

China reaffirms it will not renounce the use of force over Taiwan

This follows the war games around the island in the last few days

Chen Binhua, the spokesperson for China’s Taiwan Affairs Office said that:

“We are willing to strive for the prospect of peaceful reunification with the utmost sincerity and endeavour. But we will never commit ourselves to renouncing the use of force.”

PBOC sets USD/ CNY reference rate for today at 7.1191 (vs. estimate at 7.1208)

PBOC CNY reference rate setting for the trading session ahead

In open market operations (OMOs):

PBOC injects 642bn yuan via 7-day RR, sets rate at 1.5%
61bn mature today in OMOs
net injection 581bn

Westpac continue to expect no cash rate cut from the Reserve Bank of Australia this year

Less restrictive policy is coming in 2025

In their report WPAC conclude with what they expect from the RBA at the final two meetings this year:

The Reserve Bank Board next meets on November 4–5. We continue to expect no change in the cash rate target rate at this meeting or at the Board’s last meeting for the year, in December. However, we do expect to see a shift in the Board’s messaging with a move away from the ‘inflation vigilance’ that has dominated its communication in 2024. The exact timing and nature of this will depend on the dataflow – the September quarter CPI update due on October 30, and the September quarter national accounts updates on December 4 in particular. Combined, these updates should provide enough comfort around the inflation outlook and confirmation of the sluggish growth pulse evident in Leading Index for the RBA to start looking ahead to less restrictive policy.

Australia leading index in September shows still very slow growth ahead

Headline for this is +0.03% m/m (prior revised to -0.01%)

Australian data, Westpac Leading Index for September 2024.

WPAC comments:

The six-month annualised growth rate in the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, lifted from -0.26% in August to -0.15% in September.

Leading Index pace of decline moderates slightly to –0.15%.
Sluggish growth pulse has continued for the best part of a year now.
Components are a 50-50 mix of positive and negative.

RBA’s Hunter says inflation expectations have not become de-anchored

Sarah Hunter, Reserve Bank of Australia Assistant Governor

policymakers remained alert to such a risk
households appear to have looked through the recent spike in inflation more than the central bank might have expected
relationship between current wage expectations and inflation expectations is relatively weak
“we’re not currently concerned that expectations could become de-anchored in the near term,”
“But we do think it’s important that we track how they’re evolving and that we understand how expectations are formed, so we can monitor whether there are any signs of this risk materialising in the future.”

RBA’s Hunter says inflation has been more sticky than the Bank expected

Hunter Q&A at the Citi Australia & New Zealand Investment Conference, Sydney

monitoring data to see if inflation will remain sticky
there are risks both ways
current policy is restrictive
very mindful and watchful of what we see overseas and what the lessons might be

RBNZ’s own preferred inflation model 3.4% y/y for Q3 2024 (prior 3.6%)

The sectoral factor model is the Reserve Bank of New Zealand’s own preferred inflation measure

The Bank on its own model:

We created the sectoral factor model. It estimates the common component of inflation in the CPI basket, the tradable basket, and the non-tradable basket, based upon separate factors for the tradable and non-tradable sectors. The data excludes GST.

New Zealand Q3 CPI

New Zealand inflation data for the third quarter of 2024 (July, August, September)

Data:

0.6% q/q (expected 0.7%)
2.2% y/y (expected 2.2%)
non-tradable prices +1.3% q/q and +4.9% y/y
tradeables -0.2% q/q

That y/y result shows for the first time since March 2021, annual inflation is within the Reserve Bank of New Zealand’s target band of 1 to 3 percent.

Despite still substantial non-tradeable inflation it appears this data will keep the RBNZ cutting cycle on track.

RBNZ’s Silk says confident inflation will converge to 2% target midpoint in medium term

Reserve Bank of New Zealand Assistant Governor Silk:

Remain confident that inflation will converge back to the 2% target midpoint in the medium term.
We will continue to assess and respond to risks arising from broader economic conditions to manage inflation back to this level.
Monetary policy has been sufficiently restrictive to ensure that broader financial conditions are supporting achievement of RBNZ inflation objectives.
Over recent meetings, the committee has become increasingly confident that monetary policy has had the desired effect.

Japan’s largest union group Rengo reportedly eyes wage hike of 5% or more in 2025

Jiji Press reports on the matter

That will be a welcome boost for the BOJ, after the 5.25% wage hike in the spring wage negotiations this year. That was the highest since 2013, following the 3.80% wage hike back in 2023 before that.

We’ll only get more clarity on the final figure come March next year, following the shuntō.

Japan Machinery orders for August 2024

A leading indicator of capital spending in the coming six to nine months

Core machinery orders data from Japan for August 2024, very disappointing indeed.

-1.9% m/m

expected +0.1%, prior -0.1%

-3.4% y/y

expected 3.8%, prior 8.7%

BOJ’s Adachi says conditions are already in place to start normalising policy

Bank of Japan board member Seiji Adachi speaking:

Conditions are already in place for the BOJ to start normalizing monetary policy.
In normalizing monetary policy, the BOJ must take rate hikes in several stages.
In normalizing policy, the BOJ must avoid drastic policy change that could stoke fear of a return to deflation.
The BOJ will raise rates at a very moderate pace, maintaining an accommodative financial environment, until underlying inflation stably and sustainably hits 2%.
Hiking rates at a rapid pace after the inflation target is met could cause a big shock to the economy.
The BOJ should raise rates in several stages to achieve smooth policy normalization.
Even when the BOJ raises rates, it must maintain an accommodative financial environment, meaning the real policy rate should stay below the natural rate of interest.
At present, there is no need to raise rates rapidly to curb inflation.
The BOJ must avoid a premature rate hike, using conservative estimates when gauging Japan’s natural rate of interest.
Japan’s current real policy rate is sufficiently below the natural rate, meaning an accommodative financial environment remains in place.
If chance of underlying inflation exceeding 2% heightens, BOJ will raise its policy rate at pace exceeding rate of inflation
If inflation moves sustainably, stably around 2%, BOJ can guide monetary policy in a way allowing for policy rate to move roughly in line with neutral rate
Uncertainty over the outlook means cannot project a specific level of the neutral rate
Consumption is moving in line with the trend projected by the BOJ
Output, exports and Capex are firm, but the corporate sector appears to be lacking
Cannot ignore overseas economic uncertainties for time being
Reversal of yen weakness may intensify, put downward pressure on consumer inflation
I am somewhat cautious on whether firms will continue sufficient wage hikes next year
Given global uncertainties, we must scrutinise developments in next year’s wage talks

Bank of Japan rate hike incoming at the December meeting. Another two in 2025.

And, discussions on wages and price will start again prior to December.

Nomura on Japan’s economy and the BOJ:

Japan’s economy is expected to continue its recovery and surpass its potential starting in the second quarter of 2024.
The newly formed Ishiba cabinet is focused on completely lifting Japan out of deflation, aligning with the Bank of Japan’s policy approach.
Discussions on wages and prices will resume in late October when Rengo releases its basic plan for the 2025 spring wage negotiations.
We anticipate the Bank of Japan will implement another rate hike in December 2024, followed by two more hikes in 2025.

Cryptocurrency News

Crypto Today: Bitcoin and Ethereum Eye Further Gains as XRP Steady Amidst USDT Inflows to Binance

Bitcoin is back above $67,000, trading at $67,161 on Wednesday, while Ethereum has risen above $2,600, gaining nearly 1%. XRP remains steady at $0.54 on Day 2 of the Ripple Swell 2024 event.

Bitcoin and Ethereum Updates:

Bitcoin recorded $371 million in inflows on Tuesday, signaling renewed interest from institutional investors.
Ethereum’s potential role in the market could “grow dramatically,” as noted by BlackRock CEO Larry Fink, adding to bullish sentiment around the asset.

XRP Performance:

XRP is holding firm above $0.54 during the ongoing Swell 2024 event, where Ripple’s leadership is showcasing new developments.

Market Insights:

On-chain data from Whale Alert has identified significant transfers of USD Tether (USDT) to Binance. Such inflows typically indicate rising demand and are considered a bullish signal for the market.
The launch of Donald Trump-backed World Liberty Financial’s token sale on Tuesday raised $5 million in just the first hour, although technical issues have slowed down progress toward its ambitious $300 million target.

Industry Developments:

Ripple President Monica Long announced that stablecoin RLUSD will work in tandem with XRP, sparking optimism about a potential positive impact on XRP’s price.
Bloomberg reports that Italy is set to increase the capital gains tax on Bitcoin investments from 26% to 42%, which may influence investor sentiment.
OKX exchange has announced the delisting of several trading pairs, including BLOCK/USDT and UTK/USDT, effective October 24, signaling shifts in trading strategies.

Overall, the cryptocurrency market is witnessing a mix of renewed optimism for Bitcoin and Ethereum, steady performance from XRP, and notable developments that could shape future trading dynamics.

Solana Gears Up to Test $172 Resistance

Solana is currently trading at $154.55, showing slight gains on Wednesday. The SOL token hovers around $155, positioning itself for potential upward movement.

Market Drivers:

Developer Bootcamp Announcement: Solana recently shared details regarding its developer bootcamp, aimed at enhancing developer engagement and activity within its ecosystem.
Stablecoin Inflows: On-chain tracker Whale Alerts indicates a significant inflow of stablecoins, particularly USD Tether (USDT), to Binance. This influx typically signals rising demand from retail investors, which could lead to increased trading activity and price action.