02 Nov

Today, the focus of traders’ attention is on the Bank of England’s monetary policy meeting.

November 2, 2023

By JustMarkets

At the close of the stock exchange on Wednesday, the Dow Jones (US30) index rose by 0.67%, and the S&P 500 (US500) index rose by 1.05%. The NASDAQ Technology Index (US100) closed positive at 1.64% yesterday. The S&P 500 (US500) and Nasdaq 100 (US100) indices hit one-week highs, and the Dow Jones Industrials index hit a 10-day-high. Weaker-than-expected ADP employment and ISM manufacturing reports in the US lowered bond yields and boosted stocks. Meanwhile, stock indices continued to rise in the afternoon after the FOMC committee left the rate unchanged at 5.5%, and Fed Chair Powell said that the Fed may suspend the interest rate hike campaign indefinitely: “Given how far we have come, along with the uncertainties and risks we face, the FOMC is proceeding carefully.”

Currently, markets are pricing a 19% chance of a 25 bps rate hike at the next FOMC meeting on December 12-13 and a 27% chance of a 25 bps rate hike at the January 30-31, 2024 FOMC meeting.

The latest economic data showed that the change in US employment numbers for October from ADP was positive 113,000, which was weaker than expectations of 150,000. The US Manufacturing Activity Index for October unexpectedly declined by 2.3 to 46.7, which was weaker than expected. JOLTS job openings in the US for September unexpectedly rose by 53,000 to a 4-month high of 9.553 million, stronger than expectations of a decline to 9.400 million.

Equity markets in Europe were mainly up yesterday. Germany’s DAX (DE40) rose by 0.76%, France’s CAC 40 (FR 40) gained 0.68% yesterday, Spain’s IBEX 35 (ES35) added 0.51%, and the UK’s FTSE 100 (UK100) closed positive 0.28%.

The Bank of England will hold a monetary policy meeting today. Investors expect the Bank of England to keep rates at a 15-year high of 5.25%, with policymakers predicted to reiterate that rates should remain at current levels for an extended period of time despite growing signs of weakness in the economy. But it should not be forgotten that while inflation in the UK has fallen, it remains the highest among major economies and is difficult to contain. So, any hawkish remarks from the Governor of the Bank of England may give temporary support to the British currency.

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Silver prices came under pressure yesterday amid weaker-than-expected news from China and the US on weaker demand for industrial metals following unexpected declines in China’s Caixin manufacturing PMI and US ISM manufacturing PMI for October.

Oil prices retreated from their best levels after the dollar index rose to a 4-week-high yesterday and on signs of weakness in manufacturing activity in China and the US. Crude oil inventories rose by 773,000 barrels, according to the EIA, less than expectations of 1.8 million barrels. Also, keep in mind that geopolitical risks are supporting oil prices due to fears that an escalation of the conflict between Israel and Hamas could jeopardize oil supplies from the Middle East.

Asian markets were predominantly rising yesterday. Japan’s Nikkei 225 (JP225) gained 2.41% yesterday, China’s FTSE China A50 (CHA50) added 0.84%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.06%, and Australia’s ASX 200 (AU200) ended Wednesday positive 0.85%.

Japan’s Nikkei 225 Index added 1.2% on Thursday, extending gains for the third consecutive session after the Bank of Japan took a less hawkish stance earlier in the week than many expected. A rise in technology stocks helped Australia’s ASX 200 index (AU200) climb 1.3% despite the country’s September trade surplus data falling to a 2.5-year low.

New Zealand’s unemployment rate has been on the rise. Unemployment rose to 3.9% from 3.6% in the last quarter. The employment report showed growing spare capacity in the labor market as higher interest rates cool the economy. Aggressive rate tightening by the Reserve Bank of New Zealand (RBNZ) has led to lower inflation, which fell to 5.6% in the third quarter. Inflation expectations are also falling, an encouraging sign that the RBNZ will seek to avoid a rate hike at its November meeting.

S&P 500 (F)(US500) 4,237.86 +44.06 (+1.05%)

Dow Jones (US30) 33,274.58 +221.71 (+0.67%)

DAX (DE40)  14,923.27 +112.93 (+0.76%)

FTSE 100 (UK100) 7,342.43 +20.71 (+0.28%)

USD Index  106.63 −0.03 (−0.03%)

News feed for 2023.11.02:
  • – Australia Trade Balance (m/m) at 02:30 (GMT+2);
  • – Hong Kong Interest Rate Decision (m/m) at 04:30 (GMT+2);
  • – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+2);
  • – German Manufacturing PMI (m/m) at 10:55 (GMT+2);
  • – German Unemployment Rate (m/m) at 10:55 (GMT+2);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
  • – Norwegian Interest Rate Decision (m/m) at 11:00 (GMT+2);
  • – UK BoE Interest Rate Decision (m/m) at 14:00 (GMT+2);
  • – UK BoE Monetary Policy Statement (m/m) at 14:00 (GMT+2);
  • – UK BoE Gov Bailey Speaks at 14:30 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 14:30 (GMT+2);
  • – US Natural Gas Storage (w/w) at 16:30 (GMT+2);
  • – Switzerland SNB Chairman Thomas Jordan speaks at 19:00 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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