Last Week’s Market Wrap

Although stocks continued to decline, there were encouraging indications elsewhere. US Treasurys continued to surge higher but following a test of 10s that reached 5.00% but failed to push higher, buyers entered the fixed income market. Gold and Oil remained really bullish throughout the week but news concerning hostage talks in Gaza contributed to a retreat on Friday, so we’ll see how they behave this week.

There was some stability in FX, but it could have been paralysis because the USD/JPY is still holding at 150.00 and there is a lot of uncertainty. Overall, the market was waiting to see what would happen with bonds, the USD/JPY exchange rate, and the Middle East because of the extreme uncertainty. As TSLA continues to decline after a dismal earnings release, stocks were heavily impacted in a wide move. With a packed schedule of earnings starting on Tuesday, including Microsoft, Alphabet, and Visa, next week will be crucial.

UPCOMING EVENTS:

• Monday: European and US manufacturing
• Tuesday: AU-JP-EZ-UK-US PMIs, UK Unemployment Rate.
• Wednesday: Australia CPI, German IFO, BoC Policy Decision.
• Thursday: ECB Policy Decision, US Durable Goods, US GDP Q3, US Jobless Claims.
• Friday: Tokyo CPI, Australia PPI, US Core PCE.

Last week, the ONS only released data on wages, job openings, and real-time employment information. Falling LFS survey response rates forced the release of the remaining UK labor market statistics to this week. The consensus is that the 4.3% unemployment rate will not change. The PMIs for Australia, Japan, the Eurozone, the UK, and the US will be released on Tuesday. As the central banks are anticipated to hold interest rates stable until they gather additional data and allow the monetary policy lags to permeate the economy, they are unlikely to have an impact on the near-term policy outlook at this time. The UK, the Eurozone, and particularly the US PMIs will be the most significant ones.

While the Q/Q reading is 1.1% vs. 0.8% before, the Australian Q3 CPI Y/Y is anticipated to be 5.3% vs. 6.0% prior. With the Trimmed Mean CPI Q/Q predicted at 1.1% vs. 0.9% before and the Y/Y reading seen at 5.0% vs. 5.9% prior, and the Weighted Mean CPI Q/Q expected at 1.0% vs. 1.0% prior and the Y/Y figure seen at 5.0% vs. 5.5% prior, the RBA is more likely to concentrate on the core measures. In light of the recent disappointment in the CPI data, the BoC is anticipated to maintain interest rates at 5.0%. Before then, there was a strong possibility that the BoC may have raised rates by 25 basis points because the underlying inflation indicators continued to surprise upward.

Given the dovish remarks made by ECB members, the miss in the Eurozone CPI, and the statement in the September Monetary Policy Statement stating that “the GC judges that rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to target,” the ECB is expected to maintain the deposit rate at 4.0%. The US Initial Claims last week exceeded forecasts once more, while the Continuing Claims missed for the second consecutive week, indicating that workers are having difficulty finding new employment following layoffs. According to consensus, this week’s initial claims will be 209K, up from 198K last week, while this week’s continuing claims will be 1720K, up from 1734K last week.

Although the Core-Core measure appears stickier, the Tokyo CPI is regularly heading downward and is considered a leading indication for the National CPI. The consensus predicts that the CPI ex-Fresh Food Y/Y will stay at 2.5%, while the Headline CPI Y/Y will slightly decline to 2.7% from 2.8% before. While the M/M reading is likely to be 0.3% vs. 0.4% prior, the US PCE Y/Y is predicted to slightly decline to 3.4% vs. 3.5% before. The Fed’s favored inflation indicator, the Core PCE Y/Y, is predicted to be 3.4% compared to a previous of 3.5%, while the M/M number is forecast to be 0.3% compared to a prior of 0.1%. Considering that it is unlikely to alter the near-term policy stance, this report shouldn’t move the market.