Articles

As promised last week, China has lowered the downpayment ratio for first-time home buyers to 15% while the ratio for second homes has been lowered to 20%.

This isn’t a new announcement, it’s the confirmation of government reports from last week.

This article was written by Adam Button at www.forexlive.com.

Japan data:

The u/e rate in Japan remains low.

This article was written by Eamonn Sheridan at www.forexlive.com.

No sooner did I post this:

• Late “ray of hope” in US port strike – deadline looms though

Than news crosses that the Union says ‘Nope’. Says the wage offer was not acceptable.

*

The strike begins at 12.01 am if no agreement is reached.

This article was written by Eamonn Sheridan at www.forexlive.com.

Associated Press with the hopeful report, In brief:

• strike deadline looming
• the union for 45,000 dockworkers and the group representing East and Gulf Coast ports have exchanged wage offers
• leaving a ray of hope that a deal can be reached without a major work stoppage
• U.S. Maritime Alliance, which represents 36 ports from Maine to Texas, said that both sides have moved from their previous positions

***

Strike action is threatened to begin at 12:01 a.m. Tuesday.

The ports under threat handle about half the ship cargo coming in and going out of the U.S.

This article was written by Eamonn Sheridan at www.forexlive.com.

The major US stock indices are trading mixed to start the weekend and the third quarter.

The snapshot of the market 10 minutes into the open is showing:

• Dow industrial average -194.71 points or -0.46% at 14 118129
• S&P index -4.54 points or -0.08% at 5733.63
• NASDAQ index +27.93 points or 0.15% at 18147.52

The small-cap Russell 2000 is trading down -4.93 points or -0.22% at 2219.77

For the third quarter, the major indices are all higher:

• Dow industrial average +7.7%
• S&P index up 4.98%
• NASDAQ index up 2.29%
• Russell 2000 up 8.50%

For the trading month:

• Dow , +1.29%
• S&P index up 1.46%
• NASDAQ index up 2.45%
• Russell 2000 up 0.23%

This article was written by Greg Michalowski at www.forexlive.com.

Israeli military says it has begun limited, localized and targeted
raids against Hezbollah targets in the border area of southern
Lebanon

• Israeli military
  says these targets are located in villages close to the border and
  pose an immediate threat to Israeli communities in northern Israel
• Says Israeli air
  force and IDF artillery are supporting the ground forces with precise
  strikes on military targets in the area
• Says operations
  approved and carried out in accordance with decision of political
  echelon
• Says operation
  ‘Northern Arrows’ will continue according to the situational
  assessment and in parallel to combat in Gaza and in other arenas

Markets are concerned about escalation in the conflict, especially oil traders.

–

This article was written by Eamonn Sheridan at www.forexlive.com.

Judo Bank / S&P Global for September 2024

46.7

• prior 48.7
• flash was 46.7

In summary from the report:

• Manufacturing sector weakened to cyclical lows through September.
• Demand is soft, with elevated business cost pressures.
• Manufacturing PMI index at lowest since 2016, excluding the pandemic start.
• Output and new orders are significantly below the neutral level of 50.
• Sector has been in contraction for eight months, with reduced employment (index averaging 47.9).
• Input and output price pressures back to pre-pandemic averages, but margin pressures remain significant.
• Supply chain issues persist, with delivery times below pre-pandemic levels for three months.
• Business expectations for the next 12 months remain optimistic but below pre-pandemic averages.
• Challenging conditions in late 2024, influenced by weak construction activity and soft consumer markets.
• Some improvement may come from household stimulus and population growth, but overall conditions remain subdued.

This article was written by Eamonn Sheridan at www.forexlive.com.

Expectations are for improved retail sales data from Australia today:

Commnets from CBA’s preview:

• Retail sales flatlined in July, the first official read on consumer spending since the Stage 3 tax cuts.
• We anticipate there was a small rise in August, in part owing to the early timing of Father’s Day (1 September) that saw some spillover of spending into August.
• A partial read of spending in September so far does not suggest this momentum was sustained.

***

0030 GMT is 11.30 am Sydney time and 2130 US Eastern time.

This article was written by Eamonn Sheridan at www.forexlive.com.

abrdn is an Asset Management firm. Funny spelling, short for ‘a burden’ I think, but could be wrong.

• We see prime minister Ishiba’s appointment as a positive.
• Endorsement of the Bank of Japan’s (BoJ) policy normalisation is a key benefit for markets, in addition to a pro competition and reduced fiscal stance.
• “Together, this should support the yen and enable a continued modest shift higher in front end JGB yields.
• As ever, political support remains the risk, and we are mindful of the significant effort required to regain the public’s trust following the slump in LDP approval under prime minister Kishida.

Of course politics isn’t the only input into the yen. Fed developments overnight helped cut the legs out from it:

• Forexlive Americas FX news wrap 30 Sep:Fed Powell indicates there should be 2 cuts in 2024

This article was written by Eamonn Sheridan at www.forexlive.com.

New Zealand data much improved. Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research (NZIER). Link to more here. In summary:

Business confidence comes in at -1% in Q3

• prior -44%

Net 5% expect a deterioration in general economic conditions over the coming months

• prior was 40% expecting deterioration

Firms’ own trading activity, net 31% reporting a decline in activity in their own business in Q3, but only net 2% are expecting weaker activity in Q4.

On inflation pressure:

• slight increase in the proportion of firms reporting higher costs in Q3
• only a net 3% of firms were able to raise prices to pass on costs (from 23% in Q2)
• “The change in firms’ price-setting behaviour was highlighted by the RBNZ as a key factor providing them the comfort that inflation was easing enough to warrant them in commencing an easing cycle in the OCR.

On the employment front:

• easing in capacity pressures
• significant proportions of firms now reporting it easy to find skilled and unskilled labour
• Many firms also reduced their staff numbers in the September quarter
• results point to increased slack in the labour market

—

The QSBO is a closely-watched survey:

• is one of the country’s longest-running business surveys. It provides a insights into the business climate and economic conditions in New Zealand, and the factors influencing business sentiment, such as domestic and international economic conditions, government policies, and other external events.

• surveys businesses across various sectors
• gathers data on business confidence, demand, hiring intentions, investment plans, and other economic indicators
• QSBO findings can vary significantly from one quarter to another

This article was written by Eamonn Sheridan at www.forexlive.com.

Markets in mainland China are closed today, Tuesday, October 1, 2024. They reopen for trade on Tuesday 8 October.

Hong Kong markets are also closed on Tuesday, October 1, 2024 for the National Day holiday. They reopen on Wednesday, October 2, 2024.

‘Stock Connect’, both directions, will be closed as per the mainland China holidays (i.e. until reopening Teusday October 8).

***

Shanghai-Hong Kong Stock Connect is one:

• a mutual market access program through which investors in each market can trade shares on the other market directly
• launched in 2014
• Northbound Trading allows international and Hong Kong investors to trade eligible shares listed on the Shanghai Stock Exchange via the Hong Kong Stock Exchange.
• Southbound Trading allows mainland Chinese investors to trade eligible shares listed on the Hong Kong Stock Exchange via the Shanghai Stock Exchange.
• The Shanghai-Hong Kong Stock Connect allows foreign investors to access China’s A-shares market (shares in mainland China-based companies that were previously difficult for foreign investors to access) and it allows mainland Chinese investors to access the Hong Kong market.

In addition to the Shanghai-Hong Kong Stock Connect, there is also the Shenzhen-Hong Kong Stock Connect

• launched in 2016
• links Shenzhen Stock Exchange with the Hong Kong Stock Exchange in a similar way

***

South Korea markets are also closed today for Armed Forces Day.

This article was written by Eamonn Sheridan at www.forexlive.com.

• US equity close: A surge in buying late
• Markets stop panicking when central bank start panicking
• How major market indexes performed in the third quarter
• WTI crude oil futures settled $68.17
• USD moving higher as Powell taps the brakes on cuts
• Powell Q&A: A downside risk in GDP was a revision to GDI, but GDI was revised higher
• Powell: Policy will move over time to neutral if economy meets forecasts
• Goldman Sachs highlights the case for an undershoot in US inflation
• Fed Goolsbee worried about the possible continued port shutdown. Case for rate cuts clear.
• Fed Pres. Bostic: Is open to another 50 bp cut if labor market shows continued weakness
• Israel defense minister: The next phase of the war will begin soon
• US believes Israel could imminently launch a more limited ground incursion in Lebanon
• China delivers on pledge to lower downpayments for homes
• Dallas Fed September manufacturing index -9.0 vs -9.7 prior
• ECB’s Lagarde: Next inflation reading likely to be below baseline
• Kickstart the FX trading day for Sept 30 w/a technical look at EURUSD, USDJPY and GBPUSD
• ECB’s Lagarde: Some survey indicators suggests the recovery is facing headwinds
• ForexLive European FX news wrap: Euro nudges up with month-end in focus
• Germany September preliminary CPI +1.6% vs +1.7% y/y expected

The new week was void of economic data with the exception of the Dallas Fed Manufacturing index which came in at -9.0 vs -.9.7 last month. However, there was some Fedspeak with Atlanta Fed Pres Bostic and Chicago Fed Pres. Goolsbee kicking things off.

Bostic expressed openness to a 50 basis point rate cut if the labor market continues to show signs of weakness. His baseline expectation, however, is for an orderly easing process as inflation slows and the job market holds steady. Despite this, Bostic remains cautious due to core inflation, as measured by the personal consumption expenditures (PCE) price index, still being at 2.7%.

Bostic emphasized the importance of closely monitoring job growth. He noted that if employment growth slows below 100,000 jobs, it would raise concerns about potential underlying issues in the labor market. Despite this, his business contacts report that they do not expect layoffs, and recent PCE data shows that disinflation remains on track.

Looking ahead, Bostic’s outlook involves gradual Fed easing over a 15-month period, with a target policy rate of 3.00%-3.25% by the end of 2025. The Fed’s dot plot looks for EOY 2025 at 3.40%. He currently supports one additional 25 basis point rate cut this year, contingent on upcoming inflation and labor market data. The Fed penciled in 50 bps additional easing by year end.

Soon after Bostic spoke, Chicago Fed President Austan Goolsbee, speaking on FOXBusiness, expressed concern about the potential continuation of a port shutdown. He noted that the Fed’s rate cuts are a response to the normalization of the economy, emphasizing that the labor market remains sustainable despite some cautionary indicators. Goolsbee highlighted that the process of easing interest rates is essential, predicting a significant number of rate cuts ahead. He also stated that inflation is approaching the Fed’s target and stressed that the case for cutting rates is clear and unrelated to political considerations.

After they had spoken, it was the Fed Chair Powells turn. He spoke and answered questions at a National Association of Business Economists meeting (NABE).

Powell indicated that monetary policy will gradually move toward a neutral stance if the economy continues to meet projections. He highlighted that the risks are balanced and that decisions will be made on a meeting-by-meeting basis.

Importantly, Powell noted that further cooling of the labor market is not necessary to achieve the Fed’s targets, as both the economy and labor market remain in solid shape. He expressed increased confidence that inflation is on a sustainable path toward 2%, with broad-based disinflation, and expects housing services inflation to continue declining as long as rent growth for new tenants remains low.

The recent 50 basis point rate cut, according to Powell, reflects confidence in maintaining labor market strength while recalibrating policy. He emphasized that the process of rate cuts will be gradual, guided by economic data, with the possibility of two more cuts by the end of the year.

Powell also pointed to an upward revision in Gross Domestic Income (GDI), which showed stronger growth than initially reported, with GDI growing at a 3.4% rate in the recent quarter. This revision suggests consumers may have more spending power, which could help sustain the economy’s strength.

The comments from Powell gave the USD a bid and sent yields higher as the market continued to backtrack on a 50 bp cut in November. The expectation for 50 bps is down to 35% from near 60% last week.

Looking at the yield curve:

• 2-year yield 3.643%, plus 8.0 basis points.
• 5 year yield 3.560%, +5.7 basis points
• 10 year yield 3.784%, +3.6 basis points
• 30 year yield 4.122%, +2.5 basis points.

US stocks did move lower as Powell spoke, but by the close, the major indices held pushed into positive territory to end the trading month.

• Dow Industrial average rose 17.15 points or 0.04% at 42330.15. At session lows, the index was down -383.93 points
• S&P index rose 24.31 points or 0.42% at 5762.48. At session lows, the index was down -34.64 points
• Nasdaq index rose 69.58 points or 0.38% at 18189.17. At session lows, the index was down at -122.03 points

The Small-cap Russell 2000 close up 5.26 points or 0.24% of 2229.97.

Mapping the strongest to the weakest of the major currencies, the NZD and the AUD is the strongest of the major currencies, while the JPY was the weakest of the major currencies.

This article was written by Greg Michalowski at www.forexlive.com.