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The US broader indices are closing the day higher but at the lows for the day.

• The S&P is closing up 15.40 points or 0.27% at 5823.52. The high for the day was up 34.80 points The low for the day was up 14.96 points
• The Nasdaq is closing up 48.58 points or 0.26% at 18567.19. The high for the day was up 152.40 points. The low for the day was up 44.42 points just before the close. The price is still not able to close above the high close from July at 18647.45.
• The Dow is closing up 273.17 points or 0.65% at 42387.57.

The earnings release calendar heats up tomorrow with McDonald’s, Pfizer, Alphabet, AMD all scheduled to release. ON Wednesday, Microsoft and Meta will report and on Thursday, Amazon and Apple will report. Those are some of the bigger names reporting.

TuesdayBefore Open:

• SoFi
• PayPal
• BP
• McDonald’s
• Pfizer
• Royal Caribbean Group

After Close:

• AMD
• Alphabet
• Snap Inc.
• Chipotle
• Visa
• First Solar

WednesdayBefore Open:

• Lilly
• Caterpillar
• Humana

After Close:

• Microsoft
• Meta
• Coinbase
• Robinhood

ThursdayBefore Open:

• Uber
• Peloton
• Merck
• ConocoPhillips
• SiriusXM
• Altria
• Mastercard

After Close:

• Amazon
• Apple
• Intel

FridayBefore Open:

• FuboTV
• Chevron
• ExxonMobil
• Wayfair

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

Another quiet sort of session ahaed for economic data, the jobs report from Japan for September is about it. Its unlikely to move the yen upon release. Eyes on headlines re politics, verbal intervention (if any) and the Bank of Japan though.

We have an inflation indicator from the UK a little after that. Again, probably not of much impact upon release.

• This snapshot from the ForexLive economic data calendar, access it here.
• The times in the left-most column are GMT.
• The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

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

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

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

The
Canadian dollar is threatening to hit the worst levels since May 2020 in what would be
a major range breakout. Aside from brief periods during covid and the oil price
collapse in 2016 (both less than a month long), this would be the lowest level
since 2003. I expect this period of weakness to be longer lasting as the three
legs of the Canadian economy – housing, immigration and resources extraction –
are all impaired.

The best-case
scenario for the Canadian dollar

Before I get into the base case for the loonie, it’s not set in stone that it will fall further, at least not in the short term.

For now, all eyes
are on the US election and Kamala Harris would undoubtedly be better for the loonie.
Trump who would renegotiate the USMCA once again in 2026 in a move that would
put a cloud over CAD. Moreover, broader trade and tariff worries would cool
global trade and international investment – both Canadian strengths.

Equally
important in the short term is China fiscal stimulus. At any point in the next three
weeks, we could see China’s rubber stamp parliament announce fiscal measures.
At minimum, I’d like to see $1.4 trillion in new spending (10 trillion yuan),
or around 7% of GDP. Something is coming but that might be optimistic and China
might want to see how the US election settles before deciding on a course of
action.

The base
case is the downside scenario

Trump is more-likely
to win and China is likely to under-deliver. That’s the base case, then you
turn to the domestic economy – it’s slowing and the Bank of Canada has rates
way too high at 3.75%. The housing and jobs markets are worsening. Canadian
retail sales looked good on the surface but autos are masking weakness elsewhere
and I don’t think the pop in autos is sustainable. We’re probably headed for an
ugly outcome in Toronto condos.

The Bank of
Canada should continue cutting rates rapidly but they will likely prove overly
cautious and that will prolong and deepen weakness. I don’t foresee a recession
but growth will be slow in 2025 and 2026. As that becomes increasingly clear,
the loonie will make its way to 1.42 or
68-cents.

Politics

I think
some Canadian dollar bulls are hanging their hopes on the idea that a change in
government would lead to a rapid rebound in the currency. That won’t be the
case.

Like with the UK election, the market has already priced in a change in
government by this time next year. If that’s sooner, it’s something of a
positive but nothing that will change the trajectory. It’s going to take time
to turn anything around.

To hammer
home the point, the Conservatives appear to have shifted stances this week,
announcing a removal of GST on new home sales under $1 million. Previously,
they were taking a line that campaign promises should be made in campaign. This
indicates either that 1) they believe that we’re on the brink of an election 2)
they’re going to pressure the housing market to further hurt the Liberals.

How are
they squeezing them? They basically just cut the price of a new home by
5%, but only if you wait until there is a new government to buy. So why would you buy
now? Expect new home sales to slide even further in light of this announcement.

I suspect the thinking is that Conservatives hope to engineer a bottom in
housing when they arrive in power. The good news is that they have some fiscal
room as Canadian deficits are running much smaller than in the US.

Immigration

Canada has
several options to keep home prices high: 1) Cut rates back to rock-bottom
levels, 2) Offer fiscal support 3) Add more people.

I don’t see
any real help on any front. Rates are coming down but too slowly and 5-year
rates have moved up 30 basis points in the past month, which pressures
mortgages higher. The fiscal side is now likely a drag due to the Conservative
announcement and now immigration targets will lead to a declining population in
2025 and 2026.

The three
legs of Canadian economic growth this century have been housing, population growth, natural resources. All three are impaired to some degree,
as it’s never been harder to extract natural resources in Canada.

USD Side

You can’t
ignore the US dollar side of the equation. The US dollar is broadly stronger
over the past six weeks as the market prices out the likelihood of a US hard
landing and economic data rolls in that shows surprising strength after a weak
summer period.

In
addition, the market is sensing a Republican sweep and tax cuts, growth and
deficits to go with it. Those are US dollar positive, at least until the bill
is due.

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

Crude oil futures are settling the day at $67.38. That is down -$4.40 or -6.13%.

The low reached $66.94. The high price reached $68.84.

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

Deutsche Bank is out with a piece examining historical lessons for markets ahead of the November 5 US election.

The first takeaway is that markets may not react as dramatically to a Trump victory as they did in 2016, since it wouldn’t be the same kind of surprise – betting markets currently give him a 61% chance of winning compared to 28% in 2016.

The second takeaway is that contested election scenarios have historically been rough on stocks, pointing to the 2000 election when the S&P 500 fell 8% in November amid the Florida recount drama and the 1876 election.

On the Congressional front, the third point notes that every president since Clinton has started with their party controlling both chambers – crucial for implementing fiscal policy. Current prediction markets suggest about a 60% chance of either party achieving a “sweep” of the presidency and both chambers.

Finally, DB warns that polling errors tend to be correlated across states and Congressional races, meaning if polls are wrong in one battleground state, they’re likely wrong in the same direction elsewhere.

All that said, I’m starting to think that the trade on election day is to sell shares of DJT, most likely on a ‘sell the fact’ move or on the possibility of some kind of Democratic surprise. I imagine that most of the money that’s flowing into it over the past month is coming on the basis of a Trump win, but if/when that happens, who is left to buy shares of a tiny, money-losing social network?

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

• High yield 4.138

• WI yield st the time of the auction 4.122

• Tail 1.6 basis point 6-auction avg. 0.5bps

• Bid-to-Cover 2.39X vs 6-auction avg. 2.37x

• Dealers 14.2% vs 6-auction avg. 14.4%

• Directs (a measure of domestic demand) 9.50% vs. 6-auction avg. 17.6%

• Indirects (a measure of international demand) 76.4% vs 6-auction avg. 68.0%

AUCTION GRADE: C-

Overview: The five year note auction had a larger than average sale of 1.6 basis points indicative of sluggish demand. THe bid to cover was near the average.

Looking at the buyers, domestic demand was very week at only 9.5% versus 17.6% average. However, the international demand was much better than expected at 76.4% versus 68.0%. The problem, is that the buyers were not that aggressive relative to the WI level.

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

The second coupon auction of the day will take place at 1 PM ET, when the US treasury auctions off $70 billion of five year notes.

Earlier today, the treasury sold $69 billion of 2-year notes with a tail of 0.8 basis points. The bid to cover was less than the 6-month average. The overseas investor demand was light at 58.23% versus 67.1% average.

For the 5-year auction, the success or failure will be based on the six-month averages of the major components. That includes:

• Tail 6-auction avg. 0.5bps

• Bid-to-Cover 6-auction avg. 2.37x

• Dealers 6-auction avg. 14.4%

• Directs (a measure of domestic demand) 6-auction avg. 17.6%

• Indirects (a measure of international demand) 6-auction avg. 68.0%

The High Yield at the last auction came in at 3.519%. The current five year yield is up at 4.120% much higher than a month ago.

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

Last week, Goldman Sachs warned that a rise in 10-year yields to 4.30% could create a negative feedback loop with stock markets.

We’re getting close as 10-year yields rise 5.6 bps today to 4.286%, which is the highest since late July. The latest leg higher comes after a 2-year sale tailed by 0.8 bps. We also get a sale of 5-year Treasury notes today.

Jamie Dimon also once again warned today that inflation might not go away.

What’s concerning for the bond bulls is that today’s rise in yields comes despite a 6% decline in oil prices, something that will undoubtedly feed into Oct/November CPI data. Though you could take the long view and wonder if a year from now a return to a ‘normal’ oil prices of $80 (a 20% rise from here), will push headline CPI higher and cause the Fed to halt any cutting cycle that might be underway. Natural gas prices are also down 10% today on better weather forecasts.

Eyes are on the US election as well and rising yields fall into the theme of a ‘red sweep’ and all the tax cuts that might come with it. House betting odds currently slightly favor Republicans.

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

• Prior was 3.520%

This auction was earlier than usual today because the Treasury is also selling 5s at 1 pm ET. The glut of supply in a single day is much for the market to digest and in 15 of the past such instances, there have been 11 tails. We got the same today with a 0.8 bps tail.

I will be interested to see how the broader bond market performs after we get the 5s sale out of the way but we also get 7s and 3s this week, so the pressure won’t exactly stop. Plus, many market participants are inclined to be sidelined ahead of the election.

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

Jamie Dimon has been banging the inflation drum for the past year and has been wrong but with yields ticking up again, he has more of an audience. He says now that ‘inflation may not go away so quickly.’

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

• Prior was -9.0
• Output (production) vs -3.2 prior
• New orders vs -5.2 prior
• Employment vs +2.9 prior
• Outlook vs -6.4 prior
• Prices paid for raw materials vs +18.2 prior
• Prices received vs +8.4 prior
• Wages vs +18.5 prior

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