Daily Global Market Overview By zForex

[zForex]

Markets Upbeat with Global Risk Appetite Recovery

Global markets experienced a negative trend on the final trading day of the week due to developments in the Israel-Hamas conflict. Despite strong balance sheets, U.S. indices lost value, primarily due to increasing geopolitical risks. Major U.S. banks released their third-quarter financial reports, surpassing analyst expectations in terms of earnings per share and revenue.
Wells Fargo Company reported a 6.91% year-on-year increase in the third quarter of 2023, with earnings per share of $1.48 on revenue of $20.85 billion. The consensus expectation was for the company to announce earnings per share of $1.25 on revenue of $20.15 billion. Notably, the net profit exceeded expectations by 17.89%, reaching $5.45 billion. Also, Citigroup reported earnings of $1.63 per share on revenue of $20.1 billion. Consensus expectations were for the company to announce earnings per share of $1.22 on revenue of $19.24 billion. The net profit also exceeded expectations, showing a remarkable 40% increase to $3.50 billion.
On the macroeconomic front, consumer sentiment data published by Michigan for October came at 63, compared to an expected level of 67. Similarly, consumer expectations data was lower than anticipated, at 60.7 versus an expected 65.7. The one-year inflation forecast, which was expected to be 3.2% in line with previous data, was announced at 3.8%, while the five-year inflation forecast exceeded the 2.8% expectation, reaching 3%.
Today, in the United States, we'll also see the release of the Empire State Manufacturing Index and Budget Balance data. It's anticipated that the NY Fed index, which stood at -5.0 in October, will continue to decline. Regarding budget balance data, there's an expectation for a significant drop, potentially moving from $429.8 billion in August to a billion-dollar level. Additionally, the markets will be keeping a close eye on trade balance data in the Euro area.

Post automatically merged: Oct 16, 2023

Markets Upbeat with Global Risk Appetite Recovery


Global markets experienced a negative trend on the final trading day of the week due to developments in the Israel-Hamas conflict. Despite strong balance sheets, U.S. indices lost value, primarily due to increasing geopolitical risks. Major U.S. banks released their third-quarter financial reports, surpassing analyst expectations in terms of earnings per share and revenue.
Wells Fargo Company reported a 6.91% year-on-year increase in the third quarter of 2023, with earnings per share of $1.48 on revenue of $20.85 billion. The consensus expectation was for the company to announce earnings per share of $1.25 on revenue of $20.15 billion. Notably, the net profit exceeded expectations by 17.89%, reaching $5.45 billion. Also, Citigroup reported earnings of $1.63 per share on revenue of $20.1 billion. Consensus expectations were for the company to announce earnings per share of $1.22 on revenue of $19.24 billion. The net profit also exceeded expectations, showing a remarkable 40% increase to $3.50 billion.
On the macroeconomic front, consumer sentiment data published by Michigan for October came at 63, compared to an expected level of 67. Similarly, consumer expectations data was lower than anticipated, at 60.7 versus an expected 65.7. The one-year inflation forecast, which was expected to be 3.2% in line with previous data, was announced at 3.8%, while the five-year inflation forecast exceeded the 2.8% expectation, reaching 3%.
Today, in the United States, we'll also see the release of the Empire State Manufacturing Index and Budget Balance data. It's anticipated that the NY Fed index, which stood at -5.0 in October, will continue to decline. Regarding budget balance data, there's an expectation for a significant drop, potentially moving from $429.8 billion in August to a billion-dollar level. Additionally, the markets will be keeping a close eye on trade balance data in the Euro area.


The week begins with the EUR/USD pair showing a positive start and bouncing back from Friday's decline to reach levels slightly below the key psychological threshold of 1.0500. Now, it appears that the pair has broken a two-day trend of losses. However, during the International Monetary Fund's annual meeting, ECB President Christine Lagarde noted over the weekend that economic growth could slow down if the impact of monetary policy turns out to be more significant than expected or if the global economy weakens further and geopolitical risks escalate. This serves as a reminder for EUR/USD bulls to exercise caution.

Today, the parity is hovering around 1.0535 level. On the upside, the parity could encounter resistance at the 1.0565 level. If that level is broken, we will follow 1.0610 as a firmer resistance. On the downside, it could push the pair down to around 1.0495, and then possibly to October’s lowest level 1.0450.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.0690	1.0610	1.0565	1.0495	1.0450	1.0425

GBP/USD pair is maintaining a favorable position, hovering around 1.2160, benefitting from the recent weakness of the US dollar. Bank of England (BoE) Governor Andrew Bailey has indicated that interest rates are likely to stay in the vicinity of the current 5.25% level to bring inflation back to the target of 2%. Meanwhile, investors have already factored in the possibility of a rate hike by the Federal Reserve (Fed) before the year concludes. As we move forward, market participants will closely watch the release of UK employment data and US Retail Sales figures scheduled for Tuesday.

Today, there's a possibility that the GBP could surpass 1.2250 and test 1.2295 level, but it's unlikely to reach the major resistance at 1.2395. Support levels are at 1.2160 and then 1.2035.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.2395	1.2295	1.2250	1.2160	1.2035	1.1900

The US Dollar (USD) had been doing well recently after the US Consumer Price Index (CPI) report, but now it's not so strong at the beginning of the week. This is affecting the USD/JPY pair. Some Federal Reserve (FED) officials have suggested that the FED might delay raising interest rates in November because treasury bond yields have gone up a lot, making it harder for people to borrow money. Because of this, people who like to buy USD are being careful, and this is making it tough for the USD/JPY pair. Additionally, there's talk that Japan might step in to help its currency (the Japanese Yen or JPY) from getting too weak. But on the other hand, the Bank of Japan (BoJ) is taking a careful approach and not planning to reduce its big financial support. This helps support the USD/JPY pair because it means people are less worried about Japan's currency getting weaker.

The pair is hovering around 149.55 level and still 148.75 level (21-Daily Simple Moving Average) could act as a support. If that level is broken, we are following 148.15 level. On the upside, 149.80/85 region is still as a resistance, next 150.15 level.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
152.15	150.15	149.85	148.75	148.15	147.15

The price of gold (XAU/USD) reached a three-week high of approximately $1,932-$1,933 on Friday. This surge was attributed to the escalating Israel-Hamas conflict, causing investors to seek shelter in traditional safe-haven assets. Further, the belief that the Federal Reserve (Fed) is approaching the end of its interest rate increases further contributed to the rise in the value of gold, a non-yielding asset.
Today, gold price is trading around $1911 and technically $910-12 area (200-day exponential moving average) is followed as the first support. Then, the next support level will be 1900/1903 region. On the upside, the bull buyers wait for the $1932-33 region and then the momentum will increase till the $1948 level.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1948	1932	1923	1903	1885	1869

 

[zForex]

Global Markets React to Economic Developments and Earnings Season​

Shares in Asia-Pacific rose, led by South Korea's Kospi index, while Australian stocks advanced as investors analyzed minutes from the central bank's recent policy meeting. New Zealand's consumer inflation hit a two-year low in the third quarter, with a 5.6% increase in consumer prices from a year ago, slower than the 6% rise in the second quarter, but still above the central bank's target range of 1% to 3%. The Reserve Bank of Australia's minutes detailed why it maintained its benchmark lending rates at 4.1% during its October monetary policy meeting. Country Garden faces the risk of defaulting on its entire offshore debt if it fails to make a $15 million coupon payment when the 30-day grace period ends on Tuesday.

In European markets, there was a slight retreat on Tuesday as corporate earnings season began, and investors continued to evaluate the situation in the Middle East. Major European companies like Ericsson, Rio Tinto, and Publicis are set to announce quarterly results on Tuesday, ahead of Wall Street giants Bank of America and Goldman Sachs reporting before the U.S. market opens. Philadelphia Federal Reserve President Patrick Harker acknowledged on Monday that the central bank's interest rate hikes have played a significant role in the surge in home prices. He reiterated his belief that the Fed doesn't need to raise rates again in this cycle and expressed a commitment to fighting inflation.

 

[zForex]

Global Economic Insights: Asian Stocks, Chinese Data, and Inflation Trends​

Asian stocks declined despite a series of positive Chinese economic data, revealing ongoing fragility in sentiment. While growth and retail sales figures suggested the economy was gaining ground, the property market continued to be a drag.

In September, China's retail sales surged, and the urban unemployment rate hit a near two-year low, according to Chinese government data. Additionally, China's third-quarter economic growth surpassed expectations, boosting hopes of reaching Beijing's annual targets for the world's second-largest economy.

However, Chinese property developer Country Garden Holdings expressed uncertainty about meeting its offshore debt obligations.

In Japan, the Bank of Japan unexpectedly initiated bond purchases after the nation's 10-year yield reached a ten-year high. This move followed renewed selling pressure on Japan's sovereign debt, fueled by speculation that the central bank might adjust its ultra-easy monetary policy sooner rather than later.

In European markets, Wednesday saw slight declines as traders monitored corporate earnings, Middle East developments, and crucial inflation data.

The U.K. experienced a 6.7% inflation rate in September, slightly exceeding expectations and remaining significantly above the Bank of England's 2% target. This highlighted the mounting inflationary pressures in the country and added complexity to the task of policymakers, who are expected to maintain unchanged interest rates at the upcoming meeting.

On the other side of the Atlantic, U.S. retail sales exceeded all forecasts, and industrial production strengthened last month. This provided fresh evidence of a robust American consumer whose spending is contributing to the stabilization of the manufacturing sector.

 

[zForex]

Global Market Trends and Economic Highlights: Asia-Pacific, Europe, and the U.S​

Asia-Pacific markets saw a significant sell-off, with both South Korean and Hong Kong markets experiencing approximately 2% losses. European markets opened lower on Thursday, as investors assessed the impact of the Middle East crisis, along with earnings and economic data.

In September, Australia's seasonally adjusted unemployment rate dropped to 3.6%, which was contrary to the 3.7% expected by economists polled by Reuters. Japan reported a trade surplus of 62.4 billion yen ($416.6 million) for September, with data from Japan's customs agency revealing a 4.3% increase in exports year on year, while imports declined by 16.3% compared to the same period last year.

The Federal Reserve's Beige Book report, released on Wednesday, indicated that the U.S. economy had shown minimal or no change over the past six weeks. It described spending as "mixed" and noted a modest increase in prices, with companies expecting inflation to rise at a slower pace. Later, the focus will shift to U.S. economic data, including initial jobless claims, to gain fresh insights into the state of the economy.

A busy schedule of Fed speakers will be highlighted by Chair Jerome Powell's appearance at the Economic Club of New York.

 

[zForex]

Asia's Property Sector Concerns, Earnings Disappointments in Europe, and Global Interest Rate Trends

In Asia, concerns in the property sector caused declines in Chinese shares, and there were announcements of investigations into Foxconn Technology Group. At the beginning of Asian trading, the yen slipped to 150.11.
European stocks declined due to disappointing earnings, particularly from Volkswagen and Royal Philips. Treasuries and oil prices also fell. The US 10-year note yield increased to 4.98%, while oil dropped to $87 per barrel, and gold fell from a five-month high.
Traders were closely monitoring developments in the Middle East, which included the release of US hostages by Hamas and aid reaching Gaza through Egypt. However, Israel continued air raids on Gaza in preparation for the next phase of its conflict with Hamas.
During this week, traders were seeking hints regarding global interest rates, which included inflation data from Australia and Japan, as well as economic activity data from the US and Europe. Federal Reserve Chairman Jerome Powell was scheduled to give remarks, and the European Central Bank was set to make a policy decision later in the week.
Higher bond yields are posing challenges for equity valuations and may impact companies reporting earnings this week, such as Microsoft, Alphabet, Amazon, Meta, Intel, IBM, General Motors, and General Electric. No major data releases are scheduled for the day.

 

[zForex]

The Impact of Rising Treasury Yields on the US Stock Market

US stock market has been experiencing a decline for the last two weeks, with all major indices falling. The decline can be attributed to the influence of US treasuries, which are contributing to a risk-off sentiment. Higher Treasury yields can curb investors' appetite for stocks and other risky assets by tightening financial conditions as they raise the cost. The stock market has been under pressure from the bond market, where the yield on the 10-year Treasury briefly touched 5% Thursday evening for the first time since 2007. High yields make borrowing more expensive for everyone, and they slow the economy while dragging on prices for stocks and other investments. The role played by earnings should intensify this week as some of the tech giants step up to bat. 2023 has seen an overreliance upon a handful of names to drive market upside, with speculation over potential AI revenues helping to lift valuations. Elevated treasury yields continue to put downward pressure on stock valuations. The yield on the 10-year U.S. Treasury note topped 5% early Monday, reclaiming a peak seen last week which marks the highest point for the yield benchmark since 2007. The week ahead will be busy for markets, with earnings due from Microsoft, Alphabet, Amazon, and Meta Platforms. The market was quick to react to this somewhat hawkish Fed outlook. Treasury yields moved sharply higher, as both the 2-year and 10-year yields moved to highs of this cycle, putting downward pressure on stock and bond returns. Longer-duration parts of the market, including technology and growth sectors, underperformed the broader market.
Geopolitical tensions in the Middle East have been a cause of concern for investors in the US stock market. The Israeli-Hamas war has sharpened focus on rising geopolitical risks for financial markets, as investors wait to see if the conflict draws in other nations. In the past week, concerns about the conflict have fed through to asset prices, contributing to weakness in stocks. Safe-haven assets saw buying with gold ended the week up with more than 2.5%.

 

[zForex]

Global Markets React to Business Activity Data and Economic Uncertainty

Asian-Pacific markets recovered from earlier losses, driven by the evaluation of private business activity surveys in Japan and Australia, along with South Korea's October producer price index. European markets cautiously opened higher on Tuesday, with investors monitoring the latest Eurozone business activity data.
In Japan, flash estimates from au Jibun Bank revealed a contraction in business activity in October, marking the first decline since December 2022. The composite purchasing managers index dropped to 49.9 from 52.1 in September, primarily due to a sharper decline in manufacturing activity. Australia also witnessed a decline in business activity, hitting a 21-month low in October, as reported by Juno Bank. The composite purchasing manager's index fell to 47.3 from 51.5 the previous month, with manufacturing PMI at a six-month low of 48.0 and services PMI at a 10-month low of 47.6.
Meanwhile, Treasuries are bouncing back after prominent market bears warned of an economic slowdown, raising expectations of Federal Reserve interest rate cuts. The erratic swings in government debt are unsettling investors due to the challenge of predicting when the Fed will halt rate hikes amid a resilient economy.
Preliminary Eurozone purchasing manager's index data for October is eagerly awaited, providing insights into the performance of the manufacturing and services sectors.
Bitcoin, on the other hand, started the week trading above the critical $30,000 resistance level, building on gains from the previous week, driven by optimism about the potential launch of the first spot Bitcoin ETF and a flight to safety.

Post automatically merged: Oct 24, 2023

China's Property Market Woes: Implications for Economic Recovery and Global Growth

China's economy faces significant challenges, especially in the housing market. Historically, the real estate sector has been a major contributor, accounting for up to 30% of the economy. However, it has struggled for over two years due to a government-initiated crackdown on developer borrowing. Property investments dropped by 9.1% in the first nine months of 2023, indicating worsening investor sentiment. Although GDP growth exceeded expectations, reaching 4.9% in Q3 2023, driven by consumer spending, the ongoing fragility of the property sector impedes China's economic rebound.
Although easing policies reduced buying costs, they failed to generate new demand, and support measures haven't significantly boosted confidence among buyers. New home prices in China fell for the third consecutive month in September, down 0.2% from August, traditionally a peak home buying period. Recent data also shows double-digit declines in property sales and investments, indicating ongoing economic challenges.
As of 2020, the property sector has played a substantial role in the Chinese economy, representing roughly 70% of household wealth. However, its contribution to local government income dropped from over 40% to 37% in 2022. Capital Economics estimates a 4.3% contraction in China's net household wealth in 2022, primarily due to falling home prices and stock market performance.
The Chinese government has implemented numerous stimulus measures, such as cutting mortgage rates and lifting home purchase restrictions, but these efforts haven't led to a sustained market recovery. The IMF warns that China's property downturn will impact global growth prospects.
Addressing the real estate issue requires a comprehensive strategy, including ensuring that pre-financed houses are constructed, as most new homes in China are sold before being built. Fixing the property sector is likely to be a multi-year or even decade-long endeavor.
China's rapid urbanization over the past decade is slowing down, and property market woes have eroded consumer confidence. Troubles at property giants like Evergrande and Country Garden, burdened by debt, contribute to these challenges.
Reducing the dominance of the Chinese property sector can have positive implications for the country's future economic stability.

 

[zForex]

The Asian market experienced a substantial sell-off, with Japan and South Korean benchmark indexes leading the region's declines. In Australia, shares closed at a level not witnessed for over a year, as investors drew insights from Wall Street's overnight performance.

In Europe, stock markets opened with a sharp decline on Thursday, with a focus on third-quarter earnings and government bond yields. Notable developments included Unilever Plc falling due to a third-quarter sales miss, WPP Plc dropping more than 5% after revising its revenue growth outlook, Mercedes-Benz Group AG declining by 6% as it projected car-making margins at the lower end of its forecast, and Standard Chartered Plc's shares falling after missing profit estimates.

On Wall Street, a series of corporate earnings reports drove stock prices lower, with notable impact from Meta Inc.'s uncertain earnings outlook and Google parent Alphabet Inc.'s underwhelming cloud-related figures.

Furthermore, the 10-year Japanese government bond yield reached a fresh 10-year high ahead of a central bank meeting next week, pushing the yen past 150 per dollar and raising the risk of intervention from authorities in Tokyo. Japan's finance minister, Shunichi Suzuki, emphasized their vigilant monitoring of currency movements.

Simultaneously, monetary policy decisions are expected from the European Central Bank, where a hold in interest rates is highly anticipated, and the central bank of Turkey, with economists polled by Reuters, expects a 500 basis point hike to 35%.

Later on Thursday, a flurry of data, including US Initial jobless claims and GDP numbers, will offer a fresh snapshot of the world's largest economy. Global increases in bond yields are also casting a shadow over the markets. Recent volatility may influence the ECB's decisions on quantitative tightening, while the gradual rise in the 10-year U.S. Treasury yield is causing concerns about the outlook for stocks.

 

[zForex]

Global Markets React to Economic Trends and Political Shifts

On Friday, markets in the Asia-Pacific region attempted a rebound, with Australian stocks bouncing back from a one-year low in the previous session. Investors continued to process new inflation data. Meanwhile, European stocks are expected to open slightly higher as investors remain cautious due to earnings and the state of the global economy.
Chinese state media reported that former premier Li Keqiang passed away at the age of 68. Data released by the government shows that China's industrial profits fell in the first nine months compared to the previous year.
In Australia, government data released on Friday revealed that producer prices rose at a faster pace during the third quarter. The country's PPI recorded a 1.8% increase quarter-on-quarter, a significant jump from the previous quarter's 0.5% rise.
In Tokyo, the headline inflation rate for October came in at 3.3%, a faster rate of growth compared to the 2.8% seen in September. Core inflation, which excludes fresh food prices, stood at 2.7%, slightly higher than the 2.5% expected by economists polled by Reuters.
The European Central Bank (ECB) maintained its interest rates at their current levels on Thursday following a series of 10 rate hikes. ECB President Christine Lagarde clarified that the bank had not deliberated on the timing of the initial rate reduction, considering such a move as "totally premature."
The U.S. GDP expanded by an annualized rate of 4.9% in the third quarter, surpassing the Dow Jones forecast of 4.7% growth. This is an improvement from the 2.1% growth seen in the second quarter, indicating economic resilience despite the Federal Reserve's efforts to control inflation.
On Friday, the U.S. personal consumption expenditures reading, which is the Federal Reserve's preferred inflation gauge, is set to be released.

 

[zForex]

Global Economic Concerns Mount as Markets Reflect a $12 Trillion Loss​

Investors eagerly awaited significant economic data from the Asian-Pacific markets as the week began with a mixed start. Meanwhile, investors closely watched the latest inflation figures from Spain and Germany, anticipating a mixed opening for European markets on Monday.

The global stock market has suffered a significant loss in value of $12 trillion since the end of July. This decline has raised concerns about the sustained "higher-for-longer" interest-rate policies of central banks, which could potentially lead the global economy toward a recession.

The Bank of Japan initiated its two-day monetary policy meeting, leading to an 11-year high in 10-year government bond yields. Nearly two-thirds of economists anticipate that the Bank of Japan will end negative rates in 2024, which could lead to higher Japanese yields and present additional challenges to the Treasury market.

Australia reported a 0.9% month-on-month increase in seasonally adjusted retail sales for September, indicating growth in the retail sector.

China Evergrande Group, the world's most indebted developer, experienced a decline in its shares. However, the company gained some breathing space as a Hong Kong court postponed a winding-up hearing to December 4.

The director-general of the World Trade Organization has warned that the ongoing Israel-Hamas war could significantly impact global growth if it spills into the broader Middle East region.

The core personal consumption expenditures (PCE) price index, a closely watched inflation measure by the Federal Reserve, increased by 0.3% in September, aligning with Dow Jones forecasts. The core PCE rose by 3.7% year-over-year, consistent with expectations. Inflation expectations also experienced a significant swing in the final revision of the University of Michigan consumer sentiment survey for October, which was released on Friday.

Bitcoin is expected to record its strongest week since June, following a substantial rally earlier in the week that broke it out of the tight trading range it had been stuck in for most of this year.

 

[zForex]

Global Markets React to Central Bank Decisions and Economic Data​

Japan's stocks partially recovered losses following the Bank of Japan's monetary policy decision, while several Asia-Pacific markets saw declines due to an unexpected contraction in Chinese manufacturing activity. The Bank of Japan decided to maintain its short-term lending rate and announced increased flexibility in its yield curve control policy. Specifically, the bank stated that it would maintain the target level of the 10-year Japanese government bond yield at 0% but consider the upper bound of 1% as a reference point. Furthermore, the BOJ raised its inflation forecast for the next fiscal year to 2.8%, surpassing its previous prediction of 1.9% from three months ago.

Meanwhile, in China, the manufacturing purchasing manager's index for October came in at 49.5, falling below the Reuters poll expectation of 50.2. A PMI reading below 50 indicates a contraction in the sector.

In European markets, there is an expectation of a mixed opening as investors await important data releases in the region. Of particular interest are preliminary euro zone inflation data for October and third-quarter gross domestic product figures. Recently, German gross domestic product showed a modest 0.1% quarterly decline, which was slightly better than the 0.3% decline anticipated in a Reuters poll of economists. Inflation in Germany for October was estimated at 3.8%, the lowest since August 2021, and prices fell 0.2% on an EU-harmonized basis on a month-on-month basis. French gross domestic product growth slowed to 0.1% in the third quarter, down from the 0.6% growth experienced in the second quarter.

 

[zForex]

Europe's Delicate Balance Between Growth and Inflation Control

The economic situation in Europe and Germany has seen a slight downturn, with both experiencing a 0.1% drop in GDP in the third quarter of 2023. This decline reflects the challenges of high inflation and rising interest rates that have curtailed consumer spending and slowed growth. There is a glimmer of hope, however, as inflation rates have begun to fall, suggesting that the strict monetary policy measures may be having an effect. In October, inflation in the Eurozone fell to 2.9% and in Germany to 3.9%, showing significant progress in price stabilization.
Despite this progress, Germany's economic forecast remains guarded, with an anticipated 0.6% shrinkage for the year due to the enduring impacts of inflation and interest rate hikes. However, the outlook isn't entirely bleak, as there's an expectation of economic recovery towards the end of 2023 and continued improvement into 2025.
The path ahead for Germany and the wider European economy is a tricky one, balancing between slight economic decline and stagnation. Consumer spending, which is critical to economic health, isn't recovering as quickly as some had hoped. Ongoing adjustments by the European Central Bank and geopolitical uncertainties also play a role in shaping future economic conditions.
In summary, the current economic climate is a mixed bag for the ECB: Inflation is being brought under control, yet there is still the challenge of promoting growth without causing a renewed rise in prices or a recession.

 

[zForex]

Asia-Pacific Gains, Europe Optimistic, and U.S. Fed Decision Looms Amid Economic Shifts

Japanese equity markets outperformed other markets in the Asia-Pacific region as the Bank of Japan corrected its yield curve, attracting investor interest while keeping an eye on the U.S. Federal Reserve's upcoming interest rate decision. European equity markets are expected to open on a positive note in anticipation of the Federal Reserve's decision due on Wednesday.
On a separate note, the Caixin/S&P Global manufacturing PMI in China for October fell to 49.5 from September's 50.6, indicating an economic contraction and defying analysts' expectations.
Japanese bond futures recovered marginally after the central bank announced unexpected bond purchases to control a rise in yields following the policy announcement. The Japanese yen appreciated after the country's monetary watchdog hinted at possible market intervention due to discrepancies with economic fundamentals.
Market predictions heavily favor the Federal Reserve keeping interest rates unchanged, with futures markets indicating a 97% likelihood of this outcome.
European data revealed inflation has decreased to its lowest in two years, and contrary to the stagnant growth forecasted, the economy contracted slightly in the third quarter. This economic update comes after the European Central Bank paused its streak of interest rate hikes.
Additionally, there is interest in the U.S. government's new borrowing plan, which is expected to be disclosed shortly before the Federal Reserve shares its policy decision.

 

[zForex]

Global Markets React to Trade Data and Central Bank Actions

Global markets experienced significant fluctuations on Tuesday. South Korean stocks led losses in the Asia-Pacific region with a 3% decline. Investors closely monitored trade data from China and reacted to the Reserve Bank of Australia's recent interest rate hike.
In Europe, markets were set for a negative opening as the positive momentum of the previous week began to fade. On Monday, regional markets closed lower after a period of buoyant sentiment. Tuesday promised a plethora of earnings reports in Europe, including releases from UBS, Deutsche Post, Metro Bank, and Associated British Foods.
China reported October's trade figures, which proved to be a mixed bag. Exports in U.S. dollar terms fell by 6.4% compared to the previous year, worse than the Reuters poll's prediction of a 3.3% drop. Surprisingly, imports rose by 3% in U.S. dollar terms compared to the previous year, defying Reuters' forecast of a 4.8% decline.
Australia's central bank took action on Tuesday by raising interest rates to a 12-year high, marking the end of four months of steady policy. The Reserve Bank of Australia (RBA) left the door open for potential further tightening to address ongoing inflation concerns.
The RBA concluded its November policy meeting by increasing the cash rate by 25 basis points to 4.35%, citing data suggesting a risk of prolonged high inflation.
In the United Kingdom, retail sales for October showed a 2.5% increase, exceeding the 1.6% growth from the previous year but falling short of the three-month and twelve-month averages of 3.1% and 4.2%, respectively.
Market observers are now anticipating the Federal Reserve's response to the recent easing of financial conditions. Minneapolis Fed President Neel Kashkari emphasized that it is too soon to declare victory over inflation, despite some positive signs of easing price pressures. Several Fed officials, including Chair Jerome Powell, are scheduled to speak in the coming days.
Market swaps currently indicate expectations of over 100 basis points in rate cuts by the Fed by the end of 2024, down from an expected peak rate of 5.37%.

 

[zForex]

Market Insights: Asia-Pacific Rebounds, European Markets Weaken, and Bitcoin Hits 18-Month High

Most Asia-Pacific markets rebounded on Thursday following two consecutive days of declines. Meanwhile, data from China revealed a faster-than-expected decrease in consumer prices.​

In contrast, European markets are poised for a negative start on Thursday as momentum continues to wane. China's consumer prices dropped in October amid challenges in the country's post-Covid recovery. This follows an unexpected flat CPI in September, underscoring the need for additional policy support.

Hong Kong-listed shares of Country Garden, one of China's largest property developers, saw activity.

Federal Reserve Chair Jerome Powell chose not to discuss monetary policy during the opening remarks at a U.S. Central Bank statistics conference. However, he is scheduled to speak at another conference on Thursday, where traders will keenly analyze his words.

European Central Bank Chief Economist Philip Lane emphasized the necessity for further efforts to curb inflationary pressures, urging both companies and governments to contribute to avoiding tighter policies. U.S. Federal Reserve Bank of Philadelphia President Patrick Harker supported the Fed's recent decision to maintain interest rates unchanged and cautioned market participants not to get ahead of themselves.

Philip Lane from the ECB is set to address the audience again on Thursday, while Bank of England Chief Economist Huw Pill will also speak at an event, potentially impacting the market in light of a sparse economic calendar.

Furthermore, Bitcoin surged to an 18-month high due to growing expectations of approval for exchange-traded funds (ETFs) investing in the leading cryptocurrency. It climbed by as much as 3.6% to reach $36,856 on Thursday.

 

[zForex]

Global Markets React to Powell's Inflation Focus and Economic Developments

On Friday, Asia-Pacific markets saw declines, influenced by a negative sentiment from U.S. markets overnight. However, South Korea's benchmark index outperformed its regional counterparts for the week. European equity futures followed a similar trajectory as Asian and U.S. shares.​

Investors in Europe faced a bearish market, as they abandoned hopes of a risk asset rally following Fed Chair Jerome Powell's clear focus on addressing inflation, with potential rate hikes still under consideration. This statement, although consistent with previous remarks by several Fed speakers, caught investors' attention on Thursday, particularly after a recent rally in both stocks and bonds. Traders adjusted their expectations, with slightly higher odds of an additional rate hike and a delay in the anticipated 25-basis point rate cut, now projected for July instead of June.

U.S. Treasury yields rose following Powell's comments, along with a disappointing $24 billion 30-year Treasury auction.

Later in the day, ECB President Christine Lagarde is scheduled to participate in a fireside chat, and traders will analyze her every word.

Initial figures revealed that the U.K. economy stagnated in the third quarter, with Gross Domestic Product showing no growth in the three months ending in September, following a 0.2% increase in the previous quarter. On an annual basis, third-quarter GDP was 0.6% higher than the same period in 2022.

Investors will follow the University of Michigan Consumer Sentiment Survey and pay attention to comments from Dallas Fed President Lorie Logan and her Atlanta counterpart, Raphael Bostic.

 

[zForex]

Economic Crossroads: Hawkish Fed, Moody's Downgrade, and Key Data Releases Shape Market Outlook​

Last week's highly anticipated comments from Fed Chair Jerome Powell and other Fed members presented a hawkish stance. Despite ongoing uncertainty about inflation levels, they left the door open for rate hikes if necessary. However, the swap market still indicates an 86% probability of no hikes in December. The U.S. economic outlook remains strong, and recent NFP data indicating a slowdown in job creation is viewed positively by markets as a sign of risk appetite and a potential soft landing.

In Europe, concerns about high inflation were reiterated by ECB President Christine Lagarde, emphasizing the need to address it promptly while maintaining a restrictive monetary stance. Economic struggles in the Eurozone, especially in Germany, are evident in deteriorating PMI readings, creating a more uncertain outlook for the EURUSD pair.

Moody's Investors Service downgraded the United States government's rating outlook from stable to negative, citing increasing fiscal risks. This comes as Congress faces a potential government shutdown with current funding expiring next Friday. House Speaker Mike Johnson is expected to unveil a Republican funding plan soon. On the economic data front, investors are watching October’s federal budget and the New York Fed’s consumer expectations survey, ahead of Tuesday's crucial consumer price index data.

Bank of England policymakers Huw Pill and Katherine Mann express concerns about the impact of high-interest rates on inflation and the deepening recession fears, suggesting potential support for earlier rate cuts. Meanwhile, the Pound Sterling finds some optimism despite recession fears, as the UK economy narrowly avoids a contraction in Q3.

Ahead of the upcoming summit between U.S. President Joe Biden and Chinese President Xi Jinping, signs of improving US-China relations are emerging, including potential developments for Boeing Co. in China. The yen's drop to a 2023 low against the dollar raises the possibility of intervention by Japanese authorities. Japan’s wholesale inflation data indicates a gradual cooling of cost pressures.

Gold prices may be influenced by economic growth concerns in China, the world's largest gold producer and consumer. The Chinese CPI showed a 0.2% drop in October, with upcoming Retail Sales and Industrial Production data likely to provide further insights into China’s economic condition.

The U.S. Consumer Price Index (CPI) release on Tuesday is a key event, with the monthly CPI expected to ease to 0.1% in October and the core CPI projected to remain at 0.3%. These figures could significantly influence the direction of gold prices.

After a three-week selloff, oil prices have dropped due to concerns about the weakening demand in the United States and China. The U.S. Federal Reserve's mixed signals have also impacted market sentiment. According to the U.S. Energy Information Administration (EIA), crude oil production in the United States is expected to increase slightly less than previously thought, while demand is predicted to decrease this year.

 

[zForex]

Global Market Update: China's Economic Strength, Inflation Trends, and Oil Market Dynamics

Strong industrial output and retail sales data in China, along with news of a significant stimulus plan to boost the housing market, contributed to a sense of optimism in the markets. The MSCI's broadest index of Asia-Pacific shares, excluding Japan, surged by 2.7%, while the Hang Seng in Hong Kong saw a nearly 4% rise. Mainland property developers also experienced a strong rally, with gains of over 5%.​

China's retail sales for October showed a 7.6% increase, a figure that may have been influenced by the Golden Week holiday. However, the real estate sector continues to face challenges, with a year-on-year investment decline of 9.3%. It is expected that Beijing will provide increased support through fiscal and monetary measures to aid in the sector's recovery.

In Europe, stocks recorded gains, with the pan-European STOXX 600 index rising by 0.8 %. This was partly due to UK inflation data, which pointed to a slowdown and impacted sterling. It also supported expectations of an interest rate cut by the Bank of England by the middle of next year. The UK's consumer price index rose by 4.6% in the 12 months to October, a fall from the 6.7% rise in September, increasing the likelihood of a potential rate cut.

U.S. inflation data had a significant influence on global markets, as U.S. headline consumer prices remained flat in October, and core CPI came in below expectations. This supported the view that the Federal Reserve might pause its interest rate hikes.

Late on Tuesday, the House of Representatives passed a bill aimed at avoiding a government shutdown, which will now be sent to the Senate for a vote. If approved by lawmakers, the legislation will then go to President Joe Biden. Without a funding bill in place, the federal government is set to shut down on Friday.

Investors are now awaiting U.S. retail sales data and the producer price index (PPI) on Wednesday for further insights into the Federal Reserve's interest rate outlook.

The International Energy Agency's announcement that the oil market for the current quarter won't be as tight as initially expected was attributed to better-than-anticipated production growth in the United States and Brazil. This assessment contradicted OPEC's view, which emphasized strong growth trends and healthy fundamentals in the oil market.

In addition, the American Petroleum Institute reported a 1.3 million barrel increase in U.S. crude inventories last week, along with a simultaneous 1.1 million barrel rise in stockpiles at the Cushing, Oklahoma hub.

 

[zForex]

Financial Insights: Inflation, Interest Rates, and Global Diplomacy​

On Tuesday, a soft U.S. inflation reading raised hopes that the Federal Reserve is nearing the end of its interest rate-hiking cycle. Furthermore, there was positive economic data from China, reporting better-than-expected retail sales and industrial data for October. This has led to speculation about potential Fed rate cuts, especially following weaker-than-estimated inflation measures (CPI and PPI) published earlier in the week.

In Frankfurt, ECB President Lagarde is scheduled to speak at an event. Additionally, this week will see the release of weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, Industrial Production, and the NAHB Housing Market Index.

However, on Wednesday, the downbeat UK Consumer Price Index (CPI) data had a negative impact on the British Pound (GBP), serving as a tailwind for the GBPUSD cross. Moreover, the GBP's upside potential might be limited due to the possibility of interest rate cuts from the Bank of England in the near future.

The Japanese Yen (JPY) continues to underperform, primarily due to the Bank of Japan's (BoJ) more dovish stance. The BoJ is the only major central bank maintaining negative interest rates and is in no rush to shift away from its massive monetary easing. Traders also remain skeptical about the possibility of Japanese authorities intervening to combat any sustained depreciation of the domestic currency.

With the two inflation reports now behind us, investors will shift their focus to a range of economic data, including jobless claims, industrial production, and housing market data scheduled for Thursday. They will also closely follow remarks expected from Fed officials, including Cleveland President Loretta Mester and New York President John Williams, at various events throughout the day.

The softer tone around U.S. equity futures is driving some haven flows toward precious metals. Additionally, the expectation that the Federal Reserve (Fed) has completed its policy-tightening campaign is providing further support to gold, a non-yielding asset.

Crude oil prices are facing downward pressure due to a larger-than-expected weekly build in U.S. crude stockpiles. The EIA Crude Oil Stocks Change for the week ending on Nov 10 improved to 3.6M from the prior 0.774M, against an expected 1.793M. Furthermore, signs of easing demand in China are contributing to the negative sentiment surrounding oil prices, with China's oil refinery throughput in October showing a slight slowdown compared to the previous month's highs.

In a noteworthy development, U.S. President Joe Biden and China's President Xi Jinping met in person in San Francisco on Wednesday, marking their first meeting in about a year. Both leaders agreed to resume high-level military communication, but the issue of Taiwan remains a sticking point in their relationship.

 

[zForex]

Weaker US Economic Data and Global Recession Risks Influence Markets: Dollar Declines, Gold Gains, and Oil Prices Under Pressure

The dollar is poised for a sharp weekly decline, set to lose over 1% due to weaker-than-expected US economic data, including a slowdown in inflation. This has fueled speculation that the Federal Reserve may conclude its monetary tightening cycle. The central bank is anticipated to maintain steady rates in December, with market focus shifting to the potential timing of rate cuts by the Fed.
Earlier in the week, US consumer inflation data indicated a more significant slowdown than expected for October, and retail sales dropped for the first time in seven months. Additionally, new unemployment benefit claims in the US rose to a three-month high last week.
In the UK, retail sales figures were lower than anticipated, aligning with earlier inflation data that showed a substantial decrease. This suggests a possible easing of inflationary pressures on the UK economy, despite higher interest rates.
The Euro area is awaiting today's CPI data to gain a clearer understanding of inflation trends, following a notable drop in recent months. Today's data could influence market expectations about the European Central Bank's (ECB) potential early rate cuts, especially given the looming recession risks in economies like Germany.
Bank of Japan (BOJ) observers are monitoring the yen's trajectory, particularly after Governor Ueda acknowledged that exchange rate volatility was considered in the bank's July adjustment of its yield curve control program. Ueda's neutral stance on the yen's current state implies that there may still be room for maintaining stimulus measures.
Gold is benefiting from the anticipated shift in monetary policy, particularly from the US, as declining yields and a weaker dollar enhance its appeal. While the US economy may be heading towards a soft landing, the EU and the UK face recession risks, potentially increasing demand for safe-haven assets like gold.
The recent softer US macroeconomic data adds to concerns about a deeper global economic downturn, which could reduce fuel demand and continue to pressure Crude Oil prices. This is compounded by ongoing worries about a slowdown in China, the world's top oil importer, and diminishing concerns over supply disruptions from the Middle East, contributing to a bearish outlook for oil.