InvestMacro

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) was down by 1.29%, while the S&P 500 Index (US500) decreased by 1.37%. The NASDAQ Technology Index (US100) closed negative by 1.87% on Tuesday. The S&P 500 (US500) and Dow Jones Industrials (US30) indices fell to 4-month lows as the dollar index and government bond yields surged to 16-year highs. Hawkish comments from Fed Chair Cleveland Mester and Atlanta Fed Chair Bostic pushed 10-year T-note yields to a 16-year high as they voiced their support for keeping interest rates higher. Economic data on the labor market also supported the dollar. The US job openings rose by 690,000 from the previous month to 9.61 million in August, well above the market’s consensus forecast of 8.80 million and indicating a robust labor market. Investors fear that the Fed will raise the rate once again this year (the probability is already over 40%).

JPMorgan Asset Management warned that there is a risk of further stock market declines due to rising interest rates, “We didn’t expect this rate hike. This is something that will at least slow or even reverse the progress of stock markets.” Airbnb (ABNB) stock prices fell more than 6% and topped the list of losers on the Nasdaq 100 index after KeyBanc Capital Markets downgraded the company’s stock to sector Perform from Outperform. Goldman Sachs (GS) was down more than 3% and topped the list of losers in the Dow Jones Industrials after Morgan Stanley cut its target price on the stock to $329 from $347.

Prospects for a reduction in global fuel supplies are lending support to oil. Late last month, Russia announced a ban on gasoline and diesel exports in an attempt to stabilize domestic fuel prices. The ban will reduce fuel supplies by about 1 million BPD, about 3.4% of total global demand. The OPEC+ country will meet today. No surprises are expected – the countries are forecast to continue their previously planned cuts.

Asian markets were mostly declining yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.64% on Tuesday, China’s FTSE China A50 (CHA50) will not trade for the rest of the week due to holidays, Hong Kong’s Hang Seng (HK50) was down by 2.69% on Tuesday, and Australia’s ASX 200 (AU200) was negative 1.28%.

The Reserve Bank of New Zealand (RBNZ) left the interest rate unchanged at 5.5% and expressed a relatively soft stance on the future trajectory of the OCR in an accompanying statement. Key factors determining the likelihood and size of a November tightening will be third-quarter inflation data due on October 17 and labor market data on November 1.

Japan’s finance ministry conducted another currency intervention yesterday to support the exchange rate, although there was no official statement from officials. A spokesman for Japan’s finance ministry was not available to comment on whether Japan had intervened against the yen. But analysts pointed to other explanations, such as standing orders to sell dollars at the 150 level because of the threat of official action. Others speculate that there may have been a check by Japanese authorities on exchange rates at banks, a move often seen as a prelude to further official action.

S&P 500 (F)(US500) 4,229.45 −58.94 (−1.37%)

Dow Jones (US30) 33,002.38 −430.97 (−1.29%)

DAX (DE40)  15,085.21 −162.00 (−1.06%)

FTSE 100 (UK100) 7,470.16 −40.56 (−0.54%)

USD Index  107.06 +0.16 (+0.15%)

• – Japan Services PMI (m/m) at 03:30 (GMT+3);
• – New Zealand Interest Rate Decision at 04:00 (GMT+3);
• – New Zealand RBNZ Rate Statement at 04:00 (GMT+3);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
• – Eurozone ECB President Lagarde Speaks (m/m) at 11:15 (GMT+3);
• – UK Services PMI (m/m) at 11:30 (GMT+3);
• – Eurozone Producer Price Index (m/m) at 12:00 (GMT+3);
• – Eurozone Retail Sales (m/m) at 12:00 (GMT+3);
• – OPEC+ meeting at 13:00 (GMT+3);
• – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
• – US ISM Services PMI (m/m) at 17:00 (GMT+3);
• – US FOMC Member Bowman Speaks (m/m) at 17:25 (GMT+3);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
• – Eurozone ECB President Lagarde Speaks (m/m) at 19:00 (GMT+3).

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.

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) decreased by 0.22%, while the S&P 500 Index (US500) added 0.08%. The NASDAQ Technology Index (US100) closed positive by 0.57% on Monday. Rising T-note yields lent support to the dollar after the 10-year bond yield rose to a 16-year high of 4.701% on Monday. The US economic news released on Monday was mostly better than expected and was bullish for the dollar. The ISM manufacturing index for September rose by 1.4 to 49.0, beating expectations of 47.9. In addition, construction spending for August rose by 0.5% m/m, matching expectations.

Fed Chair Bowman’s hawkish comments on Monday were favorable for the dollar when she stated: “I continue to expect that further interest rate increases are likely to be needed to bring inflation back to the 2% level in a timely manner, as high energy prices could reverse some of the gains we have seen in recent months.” For today, markets are factoring in a 31% probability that the FOMC will raise the lending rate by 25 bps at its next meeting on November 1 and a 51% probability that the rate will be raised by 25 bps at the meeting that ends on December 13.

Goldman Sachs said on Monday that US large-cap tech stocks are likely to perform well in the third quarter after the recent sell-off led to lower valuations, and “the divergence between lower valuations and improving fundamentals represents an opportunity for investors.”

Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) fell by 0.91%, France’s CAC 40 (FR40) lost 0.94% yesterday, Spain’s IBEX 35 (ES35) declined by 1.16%, and the UK’s FTSE 100 (UK100) closed down by 1.28%. On Monday, ECB Vice President Gindos said that keeping interest rates at current levels will help bring inflation down to the ECB’s 2% target and that talk of a rate cut by the ECB is premature. This is a negative for the European currency as the ECB is likely to end its tightening cycle.

The rally of the dollar index to a 10-month high on Monday had a negative impact on energy prices. The likelihood of further interest rate hikes could slow economic growth and energy demand. But comments from the United Arab Emirates energy minister on Monday lent support to oil prices as he favored maintaining OPEC+ oil production cuts, saying the alliance was pursuing the “right policy.” Tensions in the oil market are expected to continue as OPEC+ production cuts are extended. Saudi Arabia recently said it would maintain its unilateral oil production cut of 1.0 million BPD through December. The move will keep Saudi oil production at around 9 million BPD, the lowest in three years.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.31% on Monday, China’s FTSE China A50 (CHA50) will not trade for the rest of the week due to holidays, Hong Kong’s Hang Seng (HK50) was not trading yesterday, and Australia’s ASX 200 (AU200) was negative 0.22%.

Yesterday morning, minutes from the Bank of Japan’s meeting were released, discussing the move out of negative interest rates. One board representative expressed risk management concerns about a major policy shift, as the BoJ may have enough data to make a decision on negative rates in the first quarter of next year. The prospect of a move away from negative interest rates has led to another rise in yields on 10-year Japanese government bonds, requiring the bank to make unplanned bond purchases. Japanese officials have been warning markets against currency speculation for weeks now, with the Japanese yen reaching last year’s levels when the BoJ intervened.

China’s manufacturing PMI for September rose by 0.5 to a 6-month high of 50.2, exceeding expectations of 50.1. In addition, China’s non-manufacturing PMI for September rose by 0.7 to 51.7, exceeding expectations of 51.6.

The Reserve Bank of Australia kept its interest rate unchanged at 4.1%. At the same time, the central bank reiterated its warning that further tightening might be needed to contain inflation within a “reasonable time frame.”

S&P 500 (F)(US500) 4,288.39 +0.34 (+0.08%)

Dow Jones (US30) 33,433.35 −74.15 (−0.22%)

DAX (DE40)  15,247.21 −139.37 (−0.91%)

FTSE 100 (UK100) 7,510.72 −97.36 (−1.28%)

USD Index  107.02 +0.80 (+0.75%)

• – US FOMC Member Mester Speaks (m/m) at 02:30 (GMT+3);
• – Australia RBA Interest Rate Decision (m/m) at 06:30 (GMT+3);
• – Australia RBA Rate Statement (m/m) at 06:30 (GMT+3);
• – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+3);
• – US FOMC Member Bostic Speaks (m/m) at 15:00 (GMT+3);
• – US JOLTs Job Openings (m/m) at 17:00 (GMT+3).

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.

By George Prior

Investors looking to build wealth will largely overlook World Bank reports about China and east Asia facing the worst economic outlook in half a century, predicts the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The prediction from Nigel Green of deVere Group comes as the World Bank said it now anticipates China’s output would grow 4.4% in 2024, down from the 4.8% it expected in April.

It also downgraded its 2024 forecast for GDP growth for developing economies in east Asia and the Pacific of 0.2%.

He comments: “Despite the World Bank’s gloomy outlook on China’s and east Asia’s growth and the challenges posed by factors like US protectionism and rising debt levels, global investors will continue to view the region as a highly attractive investment destination.

One of the primary reasons is the robust economic fundamentals. While growth rates may slow down, East Asian economies have demonstrated their resilience and adaptability in the face of various challenges. Countries like China, South Korea, and Vietnam have diversified their economies, focusing on innovation, technology, and export-oriented industries.

“This diversification reduces their vulnerability to economic shocks and demonstrates a commitment to long-term growth.”

East Asia is home to some of the world’s most populous countries, including China and Indonesia.

“This vast consumer base represents a significant opportunity for businesses to expand their market reach. Rising incomes and an emerging middle class in the region are driving consumer spending, making east Asia an attractive destination for companies looking to tap into this growing market.”

While some East Asian countries, like Japan, are facing aging populations, others, such as Indonesia and the Philippines, have young and growing populations. Demographic trends play a crucial role in determining long-term economic prospects.

Younger populations can drive consumption, labour force growth, and innovation, creating favorable conditions for investment.

He continues: “The majority of east Asian countries are actively investing in infrastructure development. Projects like high-speed railways, smart cities, and ports are not only improving connectivity within the region but also creating investment opportunities for both domestic and foreign investors.

“Naturally, these infrastructure investments help to lead to long-term economic growth and stability.

“Also, something that never gets underplayed by investors, is the strategic location as a crossroads between the Asia-Pacific region and the rest of the world, making it a hub for trade and investment.”

With well-established supply chains and logistical networks, the region offers a competitive advantage for businesses seeking to access global markets.

Furthermore, east Asia has established itself as a global leader in technology and innovation.

Countries like China and South Korea are home to some of the world’s most prominent tech companies. The region’s commitment to research and development, combined with a competitive business environment, fosters innovation and entrepreneurship. This technological prowess makes East Asia an appealing destination for investors seeking exposure to cutting-edge industries.

The deVere CEO observes: “In addition east Asia boasts a highly skilled and educated workforce. Countries like China – which produces 1.4 million engineers a year – and South Korea have invested heavily in education and vocational training, producing a talent pool that is well-equipped for various industries, including tech, manufacturing, and finance.”

In recent years, many East Asian governments have implemented policies to attract foreign investment. These policies include tax incentives, streamlined regulatory processes, and investment protection measures. This environment is conducive for luring foreign capital.

Nigel Green concludes: “The World Bank report says one of the world’s main growth engines is facing its slowest pace of growth since the 1960s.

“However, we fully expect east Asia to remain a highly attractive destination for global investors,.

“The region’s robust economic fundamentals, large consumer markets, infrastructure development, strategic location, skilled workforce, investment-friendly policies, technological advancements, diversification benefits, demographic trends, and regional cooperation all contribute to its enduring appeal for investors who are serious about growing their wealth.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of offices across the world, over 80,000 clients and $12bn under advisement.

By JustMarkets

At Friday’s close, the Dow Jones Index (US30) decreased by 0.47% (-1.18% for the week), while the S&P 500 Index (US500) lost 0.27% (-0.52% for the week). The NASDAQ Technology Index (US100) closed positive by 0.14% (+0.36% for the week) on Friday. The PCE core deflator for August, the Fed’s preferred measure of inflation, fell from 4.3% to 3.9% y/y, the lowest reading in 2 years. The favorable news of lower inflation boosted positive sentiment in equities. However, hawkish comments from New York Fed President Williams on Friday pushed bond yields slightly higher and pulled stocks back from better levels when he stated, “My current assessment is that we are at, or near, the peak level of the target range for the federal funds rate, though I expect we will need to maintain a restrictive stance of monetary policy for some time.”

The fundamental picture in the stock market appears to be changing as stocks are unable to bounce back with the same vigor. Rising bond yields are putting pressure on tech companies, and investors are worried that inflated valuations of mega-companies, including Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN) could be another weakness. Meanwhile, the “hype” around artificial intelligence is decreasing, and tech stocks are showing signs of vulnerability to rate hikes.

A negative factor for stocks on Friday was the likely US government shutdown, as Republicans in the House of Representatives could not agree on a plan to continue funding federal operations until October 1. However, the US Congress passed a temporary funding bill on Saturday after Republican House Speaker Kevin McCarthy dropped an earlier demand by his party’s hardliners. The House voted 335-91 to fund the government through November 17. The move marked a profound shift from early last week when a government shutdown seemed all but inevitable. A government shutdown would mean that most of its 4 million employees would not receive a paycheck – whether they are working or not. And it would also have led to a shutdown of a host of federal agencies, from national parks to financial regulators.

Equity markets in Europe were mostly up Friday. Germany’s DAX (DE40) rose by 0.41% (-0.82% for the week), France’s CAC 40 (FR40) gained 0.26% on Friday (-0.61% for the week), Spain’s IBEX 35 (ES35) added 0.01% (-0.43% for the week), and the UK’s FTSE 100 (UK100) closed up by 0.08% (week-to-date -0.99%). The Eurozone Consumer Price Index for September declined to 4.3% y/y from 5.2% y/y in August, the lowest reading in nearly two years. German retail sales in August unexpectedly declined by 1.2% m/m, which was weaker than expectations of 0.5% m/m growth and was the biggest decline in the last 8 months. All these factors indicate that the ECB will probably not raise rates again.

With OPEC+ week ahead, there is likely to be an ongoing dispute over how much oil prices can rise. However, Saudi Arabia and Russia face some difficulty in developing a rally. Saudi oil imports to India totaled less than 500,000 barrels a day in September, the lowest monthly level in nearly a decade, as global benchmark Brent crude hit a high of nearly $98 from a March low just above $70. Oil shipments from Saudi ports last month were up 300,000-400,000 barrels a day from August – despite a so-called “lollipop cut” of one million barrels a day – and that trend could continue. Oil prices fell on the last trading day of September amid growing concern about how the world will cope with rising energy prices in the coming months.

Saudi Aramco agreed to buy a stake in MidOcean Energy for $500 million, making its first investment in liquefied natural gas in a bid to diversify beyond its core oil business. Global demand for fuel has surged, especially in Europe, which is replacing reduced gas and oil supplies from Russia.

Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) fell by 2.03% for the week, China’s FTSE China A50 (CHA50) decreased by 1.45%, Hong Kong’s Hang Seng (HK50) ended the week down by 1.31%, and Australia’s ASX 200 (AU200) ended the week positive by 0.28%.

On Monday, the Bank of Japan said it will conduct additional bond purchases in an effort to slow the rise in yields after benchmark yields hit a decade high.

The central banks of Australia and New Zealand will hold meetings this week. On Tuesday, the Reserve Bank of Australia (RBA) will hold its first meeting under the leadership of Michelle Bullock, the first woman to head the bank. The RBA is expected to leave the rate unchanged, but the RBA will leave the door open for further hikes in order to be flexible. Meanwhile, the Reserve Bank of New Zealand (RBNZ) will hold its policy meeting on Wednesday. Despite the RBNZ’s hawkish stance, market watchers do not expect a rate hike, but the RBNZ may hint at a hike in November.

S&P 500 (F)(US500) 4,288.05 −11.65 (−0.27%)

Dow Jones (US30) 33,507.50 −158.84 (−0.47%)

DAX (DE40)  15,386.58 +63.08 (+0.41%)

FTSE 100 (UK100) 7,608.08 +6.23 (+0.082%)

USD Index  106.17 −0.05 (−0.05%)

• – Japan Tankan Large Manufacturers Index (m/m) at 02:50 (GMT+3);
• – Japan Tankan Large Non-Manufacturers Index (m/m) at 02:50 (GMT+3);
• – Japan Manufacturing PMI (m/m) at 03:30 (GMT+3);
• – Switzerland Retail Sales (m/m) at 09:30 (GMT+3);
• – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+3);
• – German Manufacturing PMI (m/m) at 10:55 (GMT+3);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
• – Canada Manufacturing PMI (m/m) at 16:30 (GMT+3);
• – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+3);
• – US Fed Chair Powell Speaks (m/m) at 18:00 (GMT+3);
• – US FOMC Member Harker Speaks (m/m) at 18:00 (GMT+3);
• – US FOMC Member Williams Speaks (m/m) at 20:30 (GMT+3).

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.

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.35%, while the S&P 500 Index (US500) added 0.59%. The NASDAQ Technology Index (US100) closed positive by 0.83% on Thursday.

Fed spokesman Neel Kashkari continued his aggressive stance on monetary policy yesterday, stating the potential need for another Fed interest rate hike. The US second quarter GDP was revised downward, and home sales fell more than expected in August. On the positive side, Thursday was a weaker dollar and dovish comments from Chicago Fed Chairman Goolsbee, who said policymakers risked raising interest rates too much.

The head of the largest US bank, Jamie Dimon, said yesterday that the world is not ready for a 7% rate along with stagflation and that going from 5% to 7% would be much more painful than 3% to 5%. In fact, even 5% is already a pain that no one has fully felt yet, as current actual US government debt service rates are only approaching 3%. The cost of servicing private sector debt is also far from rates consistent with 5%.

Recent data shows that Reverse Repo volumes are actively declining. This suggests that banks are no longer “parking” excess liquidity with the Fed and are beginning to actively buy short-term Treasury bills. In periods of such rotations, the capital flow of investors does not go into shares, and it leads to the weakness of stock indices.

US GDP in Q2 amounted to 2.1% (annualized q/q), which was weaker than expectations of a 2.2% increase. But overall, the US economy continues to show economic resilience. The second quarter personal consumption reading was revised downward to 0.8% from the previously announced 1.7%. US weekly initial jobless claims rose by 2,000 to 204,000, indicating a robust labor market. US home sales in August fell by 7.1% m/m, weaker than expectations of 1.0% m/m and the largest decline in 11 months.

Equity markets in Europe were mostly up on Thursday. Germany’s DAX (DE40) rose by 0.70%, France’s CAC 40 (FR40) gained 0.63% yesterday, Spain’s IBEX 35 (ES35) added 1.03%, and the UK’s FTSE 100 (UK100) closed positive by 0.11%.

The Eurozone Economic Confidence Index for September fell by 0.3 to 93.3, which was stronger than expectations of 92.4. The German Consumer Price Index (EU harmonized) fell from 6.1% to 4.5% y/y, the lowest level in two years. ECB Governing Council representative and Bundesbank President Nagel said that additional ECB interest rate hikes could be imminent “if the data show that further action is warranted.” Eurozone inflation data will be released today. Overall inflation is expected to fall from 5.2% to 4.5% y/y, while core inflation (excluding food and energy prices) is expected to fall from 5.3% to 4.8% y/y. Such data would be a dovish factor for ECB policy.

Natural gas prices rose to a 1-week high on Thursday and closed moderately higher. Forecasts of colder weather that will spur demand for natural gas for heating helped push prices higher after WSI Trader reported that below-normal temperatures could spread to the central US by the middle of next month. But natural gas price gains were capped yesterday after the EIA’s weekly natural gas inventories rose 90 bcf, exceeding expectations of 89 bcf. As of September 25, natural gas storage in Europe was 95% full, well above the 5-year seasonal average of 87% for this time of year. The US natural gas inventories as of September 22 were 6.0% above the 5-year seasonal average.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.54% for the day, China’s FTSE China A50 (CHA50) fell by 0.58%, Hong Kong’s Hang Seng (HK50) was down by 1.36% for the day, and Australia’s ASX 200 (AU200) was negative 0.05% for Thursday. Today is a bank holiday in China.

Core inflation in Japan’s capital slowed in September for the third consecutive month, mainly due to lower fuel costs. Tokyo’s core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, came in at 2.5% y/y in September, while the median market forecast called for a 2.6% y/y figure. Other data showed factory output was unchanged in August, suggesting that companies are feeling the pain from weaker global demand and weak signs in China’s economy. Despite slowing inflation, the continued rise in food and service prices is likely to force the Bank of Japan to phase out its massive stimulus, analysts said.

S&P 500 (F)(US500) 4,299.70 +25.19 (+0.59%)

Dow Jones (US30) 33,666.34 +116.07 (+0.35%)

DAX (DE40)  15,323.50 +106.05 (+0.70%)

FTSE 100 (UK100) 7,601.85 +8.63 (+0.11%)

USD Index  106.14 -0.53 (-0.50%)

• – Japan Tokyo Core CPI (m/m) at 02:30 (GMT+3);
• – Japan Industrial Production (m/m) at 02:50 (GMT+3);
• – Japan Retail Sales (m/m) at 02:50 (GMT+3);
• – UK GDP (q/q) at 09:00 (GMT+3);
• – German Retail Sales (m/m) at 09:00 (GMT+3);
• – Switzerland KOF Leading Indicators (m/m) at 10:00 (GMT+3);
• – Eurozone ECB President Lagarde Speaks at 10:40 (GMT+3);
• – German Unemployment Rate (m/m) at 10:55 (GMT+3);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
• – Canada GDP (m/m) at 15:30 (GMT+3);
• – US PCE Price index (m/m) at 15:30 (GMT+3);
• – US Chicago PMI (m/m) at 16:45 (GMT+3);
• – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3);
• – US FOMC Member Williams Speaks at 19:45 (GMT+3).

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.

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) decreased by 0.20%, while the S&P 500 Index (US500) added 0.02%. The NASDAQ Technology Index (US100) closed positive by 0.22% on Wednesday.

The Dow Jones Industrials (US30) fell to a 3-month low. The broad market moved to the downside yesterday after bond yields resumed their upward trend, with the 10-year German bond yield rising to a new 12-year high. Stocks initially headed higher after bond yields fell amid dovish comments from Minneapolis Fed President Kashkari, who said the government shutdown and a prolonged strike by automakers may require less action from the Fed. Stocks also gained support after Democratic and Republican leaders in the Senate on Tuesday night agreed on a plan to keep the government open through mid-November and provide $6 billion in aid to Ukraine.

According to the Mortgage Bankers Association (MBA), US mortgage applications fell by 1.3% for the week ended September 22 from the previous week. The subindex of home purchase applications fell by 1.5%, and the subindex of refinance applications fell by 0.9%. The average 30-year fixed-rate mortgage rose by 10 bps to 7.1%, the highest rate in 22 years. US new capital goods orders rose by 0.9% m/m in August, beating expectations of 0.1% m/m and the most substantial increase in 7 months.

Markets factor in a 24% probability that the FOMC will raise the interest rate by 25 bps at the next FOMC meeting on November 1 and a 47% probability that the rate will be raised by 25 bps at the meeting ending December 13. Markets then expect the FOMC to start cutting rates in the second half of 2024 in response to an anticipated slowdown in the US economy.

Equity markets in Europe were mostly down on Wednesday. Germany’s DAX (DE40) was down by 0.25%, France’s CAC 40 (FR40) fell by 0.03% yesterday, Spain’s IBEX 35 (ES35) lost 0.42%, and the UK’s FTSE 100 (UK100) closed negative by 0.43%.

Germany’s GfK Consumer Confidence Index for October fell to a 6-month low of 26.5, weaker than expectations of 26.0. The French consumer confidence indicator for September fell to a 4-month low of 83, weaker than expectations of 84. Five German economic institutions downgraded their forecasts for German GDP for 2023 to a contraction of -0.6% from a previous forecast of 0.3% growth. Eurozone M3 money supply contracted by a record 1.3% y/y in August, weaker than expectations of 1.0% y/y.

Oil prices rose to a 13-month-high yesterday. Crude oil prices continue to rise amid concerns that global oil supplies will remain tight for the foreseeable future. The weekly EIA report released on Wednesday showed crude oil inventories fell to a 9-month low, and crude inventories at Cushing, the delivery point for WTI crude futures, fell to a 14-month low.

Asian markets traded flat on Wednesday. Japan’s Nikkei 225 (JP225) gained 0.18% for the day, China’s FTSE China A50 (CHA50) fell by 0.05%, Hong Kong’s Hang Seng (HK50) ended the day up by 0.83%, and Australia’s ASX 200 (AU200) ended Wednesday positive 0.05%.

In China, Evergrande’s suspension has dampened sentiment in Chinese markets ahead of the week-long Autumn Festival holiday. Nevertheless, the holiday is expected to support the Chinese economy by boosting consumer spending.

Uncertainty over China caused Australia’s ASX 200 Index (AU200) to lose most of its gains for the day. Data also showed that Australian retail sales rose less than expected in August amid continued pressure from high-interest rates and inflation.

S&P 500 (F)(US500) 4,274.51 +0.98 (+0.02%)

Dow Jones (US30) 33,550.27 −68.61 (−0.20%)

DAX (DE40)  15,217.45 −38.42 (−0.25%)

FTSE 100 (UK100) 7,593.22 −32.50 (−0.43%)

USD Index  106.73 +0.50 (+0.47%)

• – Australia Retail Sales (m/m) at 04:30 (GMT+3);
• – German Consumer Price Index (m/m) at 15:00 (GMT+3);
• – US GDP (q/q) at 15:30 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Pending Home Sales (m/m) at 17:00 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US Fed Chair Powell Speaks at 23:00 (GMT+3).

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.

By ForexTime

• US government shutdown may further slow economic momentum
• Fed could be prevented from one last rate hike
• Market reaction from 2018 shutdown may repeat itself
• US dollar may weaken, but not much
• Gold, US stock indexes could recover

The US government is set to be shut down temporarily, starting this Sunday, October 1st.

The Democrats and Republicans in the world’s largest economy are at loggerheads, yet again, over how to deploy fiscal funds.

A blast from the past …

Since 1981, the US government has suspended operations (though not entirely) 14 different times.

The last time we saw a US government shutdown was for a 35-day stretch between December 2018 till January 2019 – the longest shutdown in US history.

And during that last shutdown:

• The US dollar (as measured by USDInd) fell by 1.2%
• Gold climbed by 3.8%
• SPX500_m soared by 10.3%

Perhaps the more notable takeaway from that prior episode is this:

The previous US government shutdown also coincided with the Fed’s last interest rate hike for that cycle.

• December 2015: Fed raises US interest rates for the first time since the global financial crisis
• December 2018: US government shuts down for 35 days; Fed’s last rate hike of that cycle that began in Dec 2015
• July 2019: Fed turns tail and begins CUTTING rates, eventually sending it all the way back down to near-zero at the onset of the global pandemic in 2020.

Would Fed adopt same playbook at imminent US government shutdown?

Probably not, given that core US inflation, at 4.1% in August, remains more than double the Fed’s 2% inflation target.

Sticky inflation suggests that one more Fed rate hike could be in the pipeline, or at least US rates staying higher for longer.

Still, markets remain obsessed with trying to figure out:

• Whether the Fed can trigger one last 25-basis point hike by year-end?
  Currently, markets predict a 53% chance of it happening.
• How long will the Fed keep interest rates at this peak?

And we know that these rate hikes are intended to slow down inflation by destroying demand in the economy.

Even prior to the threat of this imminent government shutdown, economists and market watchers had already been bracing for a US economic slowdown, possibly even a recession.

Goldman Sachs predicted that the shutdown may result in a 0.2 percentage point drag on US GDP per week.

How would a government shutdown slow the US economy?

A US government shutdown means that:

• many public employees, including staff at national parks to museums, will see their paycheques halted.
• private companies that get paid from government contracts, stand to lose almost US$ 2 billion a day from this shutdown.
• The highly-anticipated releases of the US nonfarm payrolls report (due Friday, October 6th) and the US consumer price index (due October 12th), as well as other major economic data, may be delayed.

All the above suggests that, the longer the US government stays shut, the more it deprives the world’s largest economy of crucial fiscal spending.

Hence, an extended US government shutdown could yet raise the prospects of a US recession.

And that could prevent one more Fed hike, or even hasten a rate cut.

And such an outlook would have a major impact across global financial markets.

POTENTIAL SCENARIOS

If the US government is shut down, as expected, beginning October 1st, with signs of staying offline for an extended period, we’d expect a similar market reaction from 2018:

• The USD Index may find it tougher to climb higher, and even moderate lower as the shutdown goes on.

However, the US dollar may not fall by much, perhaps only to around the 105.0 region, as long as US yields remain notably higher than its major peers, such as Europe, the UK, and Japan.

• Spot gold may return above $1900

An easing US dollar would make it an easier task ahead for gold bulls (those hoping prices will move higher) as markets wind down bets for one final Fed rate hike.

After all, gold tends to have an inverse relationship with US interest rates/yields/dollar (gold tends to go up when US rates/yields/dollar does down, and vice versa).

Demand for traditional safe havens, which include gold, may also help the precious metal recover.

• US stock indexes (SPX500_m, NQ100_m, WSt30_m) may find some relief

The declines of late for US stock markets have been largely attributed to the fact that the Federal Reserve intends to keep its benchmark rates higher for longer.

However, an extended US government shutdown could alter that narrative, i.e. prevent one last Fed rate hike, or potentially even bring forward the Fed’s rate CUT.

Hopes for a sooner-than-expected Fed rate cut should help US stock indexes pare back recent declines.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) decreased by 1.14%, while the S&P 500 Index (US500) lost 1.47%. The NASDAQ Technology Index (US100) closed negative 1.57% on Tuesday.

The S&P 500 (US500) and Dow Jones Industrials (US30) fell to 3-month lows, while the NASDAQ (US100) index fell to a 5-week low. Concerns about the health of the US economy pressured stocks yesterday. US new home sales in August fell by 8.7% m/m to a 5-month low of 675,000, weaker than expectations of 698,000. The Conference Board Consumer Confidence Index for September fell by 5.7 to a 4-month low of 103.0, which was weaker than expectations of 105.5.

In addition, falling tech stocks are weighing on the overall market on fears that global central banks will be forced to raise interest rates longer to fight inflation. Also weighing negatively are hawkish comments from the Federal Reserve after Minneapolis FRB President Kashkari said he believes the Fed will have to raise interest rates one more time this year due to a strengthening US economy.

Equity markets in Europe were mostly down on Tuesday. Germany’s DAX (DE40) decreased by 0.97%, France’s CAC 40 (FR40) fell by 0.70% yesterday, Spain’s IBEX 35 (ES35) was down by 0.14%, and the UK’s FTSE 100 (UK100) closed up by 0.02%.

ECB spokesman Holtzman said yesterday that it is still unclear whether the ECB has peaked as upside risks to inflation remain. But his ECB counterpart Müller does not currently expect further interest rate hikes by Europe’s Central Bank. This suggests that a rift is maturing within the ECB over the future conduct of monetary policy.

WTI crude oil prices rose moderately amid concerns that global oil supplies will remain tight for the foreseeable future. Oil prices also rose on expectations that the EIA’s weekly oil inventories report will be released on Wednesday, which will show a decline of 900,000 barrels. Tensions in the oil market are expected to continue as OPEC+ production cuts are extended. Saudi Arabia recently said it would maintain its unilateral oil production cut of 1.0 million BPD through December. The move will keep Saudi oil production at around 9 million BPD, the lowest in three years. Russia also recently announced that it will maintain its 300,000 BPD oil production cut through December. The oil rally continues, and there are no factors for a reversal at the moment.

Asian markets traded lower on Tuesday. Japan’s Nikkei 225 (JP225) declined by 1.11% for the day, China’s FTSE China A50 (CHA50) fell by 0.77%, Hong Kong’s Hang Seng (HK50) declined by 1.48%, and Australia’s ASX 200 (AU200) was negative by 0.54% on Tuesday. On Wednesday, most Asian stocks continued to fall amid lingering concerns over a US interest rate hike, while Chinese stocks rose on positive industrial earnings data and PBoC promises to expand stimulus to the economy.

But China’s worsening real estate debt crisis remains a concern for global stock markets due to fears it will derail the country’s growth prospects and drag down the global economy. China Evergrande Group said its subsidiary Hengda Real Estate Group defaulted on a 4 billion yuan ($547 million) debt payment due on Monday, and Chinese authorities have detained former executives of the company.

Minutes from Japan’s latest monetary policy meeting showed that the board’s view was that the current monetary easing should be maintained to achieve the price target in a stable and sustainable manner. Against this backdrop, the Japanese yen continues to depreciate. Yesterday, Japan’s Finance Minister Suzuki said he was closely monitoring market trends, hinting that the government could intervene at any time to support the currency. In 2022, the Japanese government conducted record dollar sales to support the yen, which by then had passed the 150 mark. Now, the currency is on the verge of testing those same levels.

S&P 500 (F)(US500) 4,273.53 −63.91  (−1.47%)

Dow Jones (US30) 33,618.88 −388.00 (−1.14%)

DAX (DE40)  15,255.87 −149.62 (−0.97%)

FTSE 100 (UK100) 7,625.72 +1.73 (+0.023%)

USD Index  106.17 +0.18 (+0.17%)

• – Japan Monetary Policy Meeting Minutes (m/m) at 02:50 (GMT+3);
• – Australia Consumer Price Index (m/m) at 04:30 (GMT+3);
• – German GfK Consumer Confidence (m/m) at 09:00 (GMT+3);
• – US Core Durable Goods Orders (m/m) at 15:30 (GMT+3);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
• – Switzerland Chairman Thomas Jordan speaks at 19:45 (GMT+3).

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.

By JustMarkets

At yesterday’s close of the stock market, the Dow Jones Index (US30) increased by 0.13%, while the S&P 500 Index (US500) added 0.40%. The NASDAQ Technology Index (US100) closed positive by 0.45% on Monday. The 10-year bond yield rose to 4.523%, the highest since 2007. The hawkish attitude of the Fed representatives is also yielding results. In the current environment, risk assets (euro, British pound, stock indices) are likely to remain under pressure while the US dollar will continue to rise.

Fears of a US government shutdown continue to grow as Congress has yet to pass any spending bills needed to fund the government beyond October 1. Rating agency Moody’s said that while a US government shutdown would negatively impact the country’s creditworthiness, the economic impact would be short-term.

Amazon.com Inc (AMZN) said it will invest up to $4 billion in Anthropic, a company that develops generative artificial intelligence technologies, including chatbots based on large language models, such as ChatGPT, for Amazon Web Services customers. Alphabet Inc Class A (GOOGL) also owns about 10% of Anthropic after investing $300 million earlier this year.

Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) decreased by 0.98%, France’s CAC 40 (FR40) fell by 0.85% yesterday, Spain’s IBEX 35 (ES35) lost 1.22%, and the UK’s FTSE 100 (UK100) closed down by 0.78%.

Germany’s IFO business climate index for September fell by 0.1 to 85.7, the lowest level in five months. According to analysts, Europe’s leading economy is at risk of a second recession in a year.

ECB spokesman Villeroy made several statements yesterday:

• The ECB has growing confidence in achieving the 2% target by 2025;
• The ECB should focus on persistence rather than raising rates;
• There is also a risk of easing monetary policy too early.

So, the ECB is following in the steps of the US Fed and plans to keep rates high as long as possible. But if economic data starts to deteriorate sharply, policymakers are prepared to consider cutting rates if necessary.

The rally in the dollar index, which reached a 6-month high on Monday, depressed energy prices. And gasoline prices fell to a 3-week low. Crude oil prices were also falling due to concerns that the worsening debt crisis in China will worsen the Chinese economy and energy demand. However, oil price losses were limited by expectations that global oil supplies would remain tight.

Asian markets traded flat on Monday. Japan’s Nikkei 225 (JP225) added 0.85% for the day, China’s FTSE China A50 (CHA50) decreased by 0.67%, Hong Kong’s Hang Seng (HK50) lost 1.82%, and Australia’s ASX 200 (AU200) was positive 0.11% on Monday.

Economists have growing fears that a worsening real estate crisis in China will undermine the country’s economy. On Sunday, China Evergrande Group canceled a meeting with creditors and said it should review its restructuring plan. In addition, China Oceanwide Holdings Ltd. said it faces liquidation after a Bermuda court ordered the company into liquidation for defaulting on a $175 million loan principal payment. There are also growing fears that China Country Garden Holdings may default after breaching initial interest payment deadlines on dollar bonds.

The Japanese government the other day promised to issue a new economic package to “ease the pain of inflation,” which, paradoxically, is still “below target levels,” according to the Bank of Japan. The package will include measures to protect the Japanese from cost inflation (energy and product subsidies), support for wage and income growth (wages and salaries are also costs and demand inflation), support for investment to stimulate growth, measures to counter population decline, and encourage infrastructure investment.

S&P 500 (F)(US500) 4,337.51 +17.45 (+0.40%)

Dow Jones (US30) 34,007.21 +43.37 (+0.13%)

DAX (DE40)  15,405.49 −151.80 (−0.98%)

FTSE 100 (UK100) 7,623.99 −59.92 (−0.78%)

USD Index  105.96 +0.37 (+0.35%)

• – US FOMC Member Kashkari Speaks at 01:00 (GMT+3);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3);
• – US New Home Sales (m/m) at 17:00 (GMT+3);
• – US FOMC Member Bowman Speaks at 20:30 (GMT+3).

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.