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US Markets Push Higher Ahead of Earnings – Dow up 0.65%

US stock markets rose yesterday ahead of significant earnings and data updates due in the coming days. Leading the charge, the Dow closed up 0.65%, followed by the Nasdaq and S&P, which gained 0.29% and 0.28% respectively. Treasury yields also edged higher as traders looked ahead to key jobs data expected in the next few days, with the 2-year yield adding 1 basis point to reach 4.108%, and the 10-year yield rising 1.2 basis points to 4.244%. The dollar strengthened slightly, with the DXY index gaining 0.06% to move to 104.29.

However, the most significant moves were seen in oil markets, where prices crashed following reports that Israel had only targeted Iranian military assets over the weekend. Brent crude fell 6.09% to $71.42, while WTI crude dropped 6.13% to $67.38. Gold initially declined on haven selling but later stabilised, losing just 0.2% from Friday’s close to finish at $2,743.31.

Jobs Data Crucial for the Dollar This Week

With four key employment updates due in the US this week, all with potential to significantly influence the dollar, markets are bracing for volatility. The Non-Farm Payrolls report on Friday is expected to have the largest impact on sentiment. However, after last month’s employment data prompted a rise of over 4% in the dollar, traders will be looking to position themselves early should any of the upcoming jobs figures deviate markedly from expectations. This week’s updates include JOLTS Job Openings, the ADP Non-Farm Payrolls, weekly unemployment claims, and Non-Farm Payrolls, all of which last month pointed to a resilient job market. Further dollar appreciation could follow similar results, while any negative surprises could trigger sharp corrections.

Macroeconomic Calendar Kicks into Action Today

The next few days will bring a substantial wave of macroeconomic releases, especially from the US. The event calendar starts tonight and remains busy until late on Friday. While the first two sessions may be relatively quiet, volatility is expected to increase once New York opens, with top-tier data releases due simultaneously. In the current environment, with the Fed’s heightened focus on employment data, the JOLTS Job Openings (expected at 7.98 million) is likely to have a greater market impact than the CB Consumer Sentiment index (expected at 99.5). Later in the day, central bank updates are expected, with speeches from the Swiss National Bank’s Martin Schlegel and the Bank of Canada’s Tiff Macklem. Both central banks have recently cut rates, so any fresh commentary is anticipated to generate further volatility in their respective currencies.

The post General Market Analysis – 29/10/24 first appeared on IC Markets | Official Blog.

From our glossary;

• The ‘blackout’ policy from the Federal Reserve limits the extent to which Federal Open Market Committee participants and staff can speak publicly or grant interviews. The period begins the two Saturdays preceding a Federal Open Market Committee (FOMC) meeting.

—

The upcoming Federal Open Market Committee (FOMC) meeting is Wednesday and Thursday, November 6 and 7.

There is a December meeting also, with an associated blackout period.

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

Luckin Coffee is China’s largest coffee chain.

The reports are that it is planning to enter the US market and undercut rivals including Starbucks with its low-priced drinks. FT with the info (gated).

The firm has not commented on the reports.

Starbucks

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

BRC Shop Price Index in October 2024 fell at the fastest pace in more than three years:

-0.8% y/y

• expected -0.5%, prior -0.6%
• eighth time in nine months that the pace of price growth has weakened

British Retail
Consortium data. BRC sound a note of caution:

• “Households will welcome the continued easing of price
  inflation,”
• “But this downward trajectory is vulnerable to ongoing
  geopolitical tensions, the impact of climate change on food
  supplies, and costs from planned and trailed government
  regulation.”

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

Data on Japan’s labour market for September 2024, the unemployment rate and jobs-toapplicat ratio.

I guess when you think about it, with inflation under 2% and full employment achieved … and you still lose the election.

Pretty harsh 🙂

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

I posted extensively on the election and the yen response yesterday, ICYMI:

• ForexLive Asia-Pacific FX news wrap: Yen, oil both sharply lower

I posted this yesterday, too. Where we’re at:

• Japan’s lower house has 465 seats
• 233 are required to form a majority
• Going into the election the ruling LDP combined with its coalition partner (which gave the two a majority in the upper house) held 288 seats in the lower house
• Current counting has LDP 191, K 24 … so 215, well short of 233 required.
• Constitutional Democratic Party of Japan is the largest opposition party, they have increased their seats to 148 (91 prior)
• Two smaller opposition parties, Nippon Ishin no Kai (has 38 seats, from 43 prior) or the Democratic Party for the People (DPP) (has 28 seats, from 7 prior) looks likely to be the partner for LDP/Komeito to get over the 233 seat line

So, the news chatter is Ishiba will seek to bring DPP into the coalition.

For the yen and BoJ the important thing is if the DPP demands some sort of cost-of-living relief that’ll involve slower rate hikes. Going into the election the DPP seemed supportive of rate hikes, but that was then they had nothing to lose. Now, if they become partners in government they will have accountability.

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

ANZ-Roy Morgan Consumer Confidence for the week drops to 86.4

• prior week was 87.5

ANZ see a bright spot:

• on a four-week moving average basis, confidence is at a 20-month high

—

Below 100 is net pessimistic.

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

UBS says not to be too concerned about record high gold prices and the 30%+ rise so far this year:

• prices will continue to rise in the months ahead

UBS forecast $2850 by mid-2025. In brief, UBS cite gold continuing to benefit from rate cuts:

• Federal Reserve easing cycle is still at an early stage … expect more cuts in 2024 (100bp in total!) & another 100bps in 2025
• Global rate cuts too – China, Canada’, ECB, and more

Politics:

• gold’s political hedging utility could blunt near-term dollar upside risks if former President Donald Trump wins the US election

More:

• Federal Reserve’s rate-cutting cycle driving financial investment demand
• Ongoing central bank buying

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

Komeito is the coaltion partner of the LDP.

Komeito leader Keiichi Ishii lost his seat in the election, he’ll be resigning party leadership. Makes senses.!

I posted on Japan’s election multiple times yesterday. ICYMI:

• ForexLive Asia-Pacific FX news wrap: Yen, oil both sharply lower

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

This via Nate Silver at 538.

Tips Trump to win, taking the Electoral College with 271 votes vs. Harris at 267.

Thats not a big margin, but its enough, and it fits with what other polls are saying.

I’ll scout around for other reputable polls too, but Silver is in line with what I’ve been seeing. Markets are pricing a Trump win, and a ‘Red Sweep’ too, yields on US Treasuries reflecting the expected higher fiscal spending.

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

• Broader US indices close near lows for the day
• ECBs De Guindos: Price outlook surrounded by substantial risks
• Why the Canadian dollar doesn’t have a leg to stand on
• Crude oil futures settle at $67.38
• BOC’s Macklem: Productivity is key to raising Canada’s living standards
• US treasury auctions off $70 billion of 5-year notes at a high yield of 4.138%
• US 10-year yields near Goldman Sachs’ line in the sand
• Goldman Sachs: RBNZ could surprise with 75bps rate cut in November
• US sells 2-year notes at 4.130% vs 4.122% WI
• Jamie Dimon: The American economy is still booming
• Dallas Fed October manufacturing business index -3 vs -9 prior
• Economist poll of the Bank of England shows cut next week but uncertainty on December
• Kickstart the FX trading day for Oct 28 w/a technical look at the EURUSD, USDJPY & GBPUSD
• It’s the best day of the year for stock markets
• A word of caution: The temperature will be rising all week long
• What technical levels are in play to start the US session on October 28?
• ForexLive European FX news wrap: USD/JPY bites into opening gap higher
• Crude Oil Technical Analysis – Israel spares Iran’s energy facilities

The economic calendar was light today as the calm before the storm sets in. This week in addition to a slew of earnings from some of the biggest of names including Apple, Amazon, Alphabet, Microsoft, Meta, McDonalds, Visa, Pfizer and Exxon Mobile amongst others, the economic calendar includes:

• JOLT job openings
• Australia QoQ CPI
• US ADP employment data
• US Advance GDP,
• US PCE data and
• US employment data
• ISM data

The Bank of Japan will also meet (on Thursday). SNB Schlegal and BOC Macklem will speak this week at various times as well. .

What won’t happen is Fedspeak as they are in the blackout period ahead of its interest rate decision on November 7. The BOE will also meet next week (on November 7 too). The RBA will announce its decision on Tuesday November 5th in Australia (at night on Monday in the US). The US election will be on Tuesday November 5th but if the polls are correct, the results might not be known for days if not weeks. Buckle up if Harris pulls a victory right away especially since the swing has moved in Trump’s favor.

If Japan is a foreshadow of the US election, watch out. The USDJPY was the biggest mover after weekend elections. The election in Japan delivered a significant setback for the ruling Liberal Democratic Party (LDP), which lost its single-party majority in the lower house following political funding corruption scandal involving senior LDP lawmakers and cabinet members.

Despite retaining more seats than the main opposition, the Constitutional Democratic Party (CDP), the LDP failed to secure the 233-seat majority needed in the 465-member Diet, even with its coalition partner Komeito’s 24 seats.

Prime Minister Shigeru Ishiba, newly appointed this month, acknowledged the “severe judgment” by voters and called for the LDP to reflect and better align with public expectations. However, the fractured opposition has not emerged as a strong alternative, leaving Japan’s political future in question.

For the USDJPY it moved sharply higher on the news (weaker JPY) but did back off from highs for the day at 153.87. The price did move down as low as 152.34 but is closing near the mid-point of the day at 153.28, good enough for a rise of 0.64% or near 100 pips.

The next biggest mover was the AUDUSD which had a volatile down, and up and down again day, closing near the lows and down -0.30%.

In the US stock market, the major indice closed higher but the broader S&P and Nasdaq closed near session lows. Nevertheless, the indices did start the week with a gain:

• Dow +0.65%
• S&P +0.27%
• Nasdaq +0.26%

The small cap Russell 2000 was the big winner with a gain of 1.63%

European indices closed higher with gains near 0.70% (give or take across the spectrum of indices)..

In the US debt market, the yields are higher and near highs for the day. The 10 year yield reached 4.30%, the highest level since July 11 and is now up 70 basis points from the September low. The US treasury frontloaded 2 coupon auctions today with both the 2 year and the 5 year having so-so demand. Each had a positive tail.

Concerns about stronger growth and a Trump victory which would imply higher tariffs, higher inflation from the tariffs, lower tax cuts, large deportation of immigrants which would likely increase service inflation and larger deficits. A Harris victory has it’s own issues as well with deficits still running hot, but is at least absent mass tariffs and sharp cuts in taxes. However, stimulus will be less as a result of the absence of the tax cuts too.

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

Nikkei (gated) have the report.

In brief:

• Toyota Motor and Japan’s Nippon Telegraph and Telephone (NTT) will invest 500 billion yen ($3.26 billion) in research and development to create artificial intelligence software to improve self-driving
• the software will use AI to anticipate accidents and take control of the vehicle
• aiming to have a working system ready by 2028 and provide it to other automakers

There is an ungated summary here for a little more.

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