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S&P 500 futures are up 32 points, or 0.55% while Nasdaq futures are up 0.7%, or 148 points.

An open at those levels will put the Nasdaq just short of the record high, which it flirted with on Friday before retreating.

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

According to this wonderful matrix from Carson Investment Research, October 28 is the best day of the year for the S&P 500, historically.

Now I don’t put much weight in daily averages because they’re highly influenced by unique events but Goldman Sachs also notes that “Today marks the first day of the open window period for corporate buybacks with ~50% in open window today” (h/t @zerohedge for that).

I’m not sure how much weight I would put on buybacks but what I would highlight on that chart is the period from now to November 5 is historically an extremely strong period.

I think it will take iron nerves to ride it out through that period because so much is going on but a very good bet is to be long any market the day after a local election. Japan proved that out once again today despite the surprising result as the Nikkei rose 1.8%.

As I often say, “there is always another trade” and that’s good advice right now because you don’t want to blow a good year at a time like this.

But if you do, one technique I find useful is visualizing future pain. In this case, that means visualizing the rollercoaster this week will be and all the ‘pain’ or uncertainty around upcoming events, and that no one can predict how they will go.

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

Discretion is the better part of valour.

This is going to be a volatile, uncertain week as we build up towards the US election next Tuesday. But it’s not just that, it’s a blockbuster week for economic data.

It starts light today with the Fed thankfully in the blackout period and only the lowly Dallas Fed on the economic calendar.

But the market is digesting a big drop in oil prices after Israel restricted its retaliation to military targets and the market suspects that’s the end of this chapter. WTI crude is down $4.40 to $67.38 in a move that’s helping to restrain Treasury yields ahead of today’s borrowing estimates. We’re also sorting through the Japanese election.

The big events this week come later with economic data and earnings. Tomorrow we get JOLTS and consumer confidence, on Wednesday it’s GDP and ADP, on Thursday it’s PCE and on Friday it’s non-farm payrolls and ISM manufacturing. For earnings, it’s the biggest week of the quarter with 5 of the Mag7 reporting.

Not only that, we get month-end flows, The UK budget, China PMIs and a handful of other major data points. S&P 500 futures are 23 points higher and FX is largely flat aside from EUR and GBP strength. I wouldn’t take any market move for granted this week and explaining moves will be difficult.

As Ryan Paisey writes, “If you’re a short-term trader, this is about as messy as things get in my opinion, snorkelling in a swamp means it’s difficult to tell the difference between a log and a piece of sh…you get the idea.”

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

Headlines:

• Yen losses ease up a little in European morning trade
• Japanese yen in the spotlight after weekend election
• Japan parliament reportedly to convene special session to vote on prime minister post
• Crude Oil Technical Analysis – Israel spares Iran’s energy facilities
• Weekly update on interest rate expectations
• ECB’s Wunsch: It is premature to discuss December policy decision
• SNB total sight deposits w.e. 25 October CHF 457.4 bn vs CHF 462.3 bn prior
• UK October CBI retailing reported sales -6 vs 4 prior

Markets:

• EUR leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.5%
• US 10-year yields up 2.5 bps to 4.256%
• Gold down 0.6% to $2,731.59
• WTI crude down 5.7% to $67.65
• Bitcoin up 2.8% to $68,660

The main focus in FX was on the Japanese yen, as it opened with a striking gap lower after the weekend election.

Japan’s ruling LDP party surrendered their outright majority in the lower house and that triggered some uncertainty on the BOJ’s confidence to stick to policy normalisation. That as prime minister Ishiba’s position is called into question following the election outcome.

USD/JPY opened with a gap up at 153.23 in Asia before holding around 153.50-60 levels in the handover to Europe. But as the dust settles, traders are slowly getting a grip on the situation that Japan’s political landscape is still likely to remain as it is for the most part – at least for now.

That saw USD/JPY fall back to around 152.60 currently, eating into the opening gap higher but still up by 0.2% on the day.

Besides that, higher bond yields remain a focal point for broader markets. And that helped to underpin USD/JPY and the dollar as well. But yields did slide off a bit during the session, tempering with the dollar mood.

EUR/USD was keeping around 1.0790-00 mostly before nudging up slightly to 1.0815 now and still largely held back by its 200-hour moving average at 1.0825.

Besides that, other dollar pairs are more muted amid the mixed mood in markets to start the new week.

In the equities space, stocks are running higher as tensions in the Middle East abate following the developments over the weekend. That saw oil prices tumble lower by nearly 6% now and is breathing life into equities, with US futures set to run away with gains at the open later.

This article was written by Justin Low at www.forexlive.com.

• Prior 4

After a brief respite in September, the UK retail sales balance heads back into negative territory for the month of October. The decline is marginal but it’s not a good start to Q4, which is typically seen as one of the hotter seasons in the run up to the year-end holidays.

This article was written by Justin Low at www.forexlive.com.

The pair is still up 0.4% on the day at around 152.90 but has fallen back below the opening gap of 153.23 upon the return from the weekend. The opening gap higher owes to the Japan election result. More on that from earlier: Japanese yen in the spotlight after weekend election

The losses in the yen are being arrested for now but it doesn’t materially alter the technical picture for USD/JPY.

The near-term chart above continues to see buyers remain in near-term control, holding well above its 100-hour moving average (red line). The key near-term level is seen at 152.13 currently, so there is some way to go in drawing another test of that again.

The opening gap higher in yen pairs owes much to traders pricing in “uncertainty” with regards to the Japan lower house election outcome. That also sees prime minister Ishiba’s position get called into question.

However, the political landscape is not likely to change much and for the time being, Ishiba might just scrape through in the upcoming vote which is reported to be on 11 November. I mean, there are no major contenders to oust him for now – not least when the party itself is reflecting a more fragile look.

The LDP and Komeito are still likely to form a majority coalition with the help of the smaller parties. So, bigger picture politics won’t see that drastic a change; even if voters are growing increasingly more frustrated.

As the dust settles, that is perhaps what is leading to traders fading the earlier spike in USD/JPY at the open.

This article was written by Justin Low at www.forexlive.com.

The week begins quietly on Monday, with no major economic events scheduled for the FX market. Be mindful of the daylight saving time shift in Europe, which may affect trading schedules.

Bank of Canada Governor Tiff Macklem will speak at a fireside chat about the Canadian economy at The Logic Summit in Toronto on Monday. There is no media availability for this event, but he is expected to reiterate his recent public statements.

On Tuesday, U.S. economic releases will include the CB consumer confidence index and JOLTS job openings. Wednesday will bring Australia’s inflation data, while in the U.S., releases include the ADP non-farm employment change, advance GDP q/q and pending home sales m/m.

Thursday will feature Japan’s monetary policy announcement alongside the Bank of Japan’s outlook report. In the eurozone, inflation data will be released, and in Canada, monthly GDP data will be published. For the U.S., important releases will include the core PCE Price Index m/m, the employment cost index q/q and unemployment claims.

Friday’s releases include Switzerland’s inflation data and a series of important U.S. data points: average hourly earnings m/m, non-farm employment change, the unemployment rate and the ISM manufacturing PMI.

This week Australia’s inflation data is expected to finally reach the desired 2-3% target range for the first time since mid-2021. This decline is largely due to lower gasoline and electricity prices. However, core inflation remains a concern, as it is likely to print above 3% due to strong labor market conditions.

The market currently anticipates that the RBA will keep its monetary policy unchanged at the upcoming November meeting.

The consensus for U.S. advance GDP q/q is 3.0% vs prior 3.0%. The U.S. economy has shown improvement compared to the beginning of the year, and this is likely to be reflected in this week’s data.

A primary driver of this growth has been consumer spending, especially in services, with the housing market and exports being the main drags. However, if the labor market continues to soften, there is a risk that consumer spending and therefore GDP growth could be negatively impacted, despite the lower interest rates.

At this week’s meeting, the BoJ is expected to keep its monetary policy unchanged. The market will closely monitor the BoJ’s quarterly outlook report, with analysts anticipating an upward revision to inflation projections for this year, no change for 2025, and a downward revision for GDP growth.

The BoJ has faced criticism regarding its communication about policy normalization this year, so ING analysts expect an improvement in this area. Recently, inflation in Japan has hovered around the 2.0% target. If it continues to trend higher, supported by wage growth and improving economic conditions, there is a likelihood that the BoJ could implement a 25 bps rate hike at the January and April meetings next year.

The consensus for the U.S. core PCE price index m/m is 0.3% vs 0.1% prior; personal income m/m is expected at 0.3%, compared to 0.2% previously; and personal spending m/m is projected at 0.4%, an increase from the prior 0.2%.

The economy’s soft landing has been supported by resilient U.S. consumers, strengthened by better-than-expected income and spending data throughout 2024. Revised data for August also confirmed that consumers are maintaining their spending capacity.

With this momentum, September is expected to show continued strength, with projected monthly growth in both personal income and spending. Inflation, measured by the Fed’s preferred PCE deflator, is forecasted by Wells Fargo to rise by 0.2% for the month, bringing annual inflation in line with the Fed’s 2.0% target if realized.

In the U.S., the consensus for the average hourly earnings m/m is 0.3% vs the prior 0.4%; non-farm employment change is expected at 111K, compared to the previous 254K, while the unemployment rate is anticipated to remain steady at 4.1%.

Following a better-than-expected report last month, this week’s data is likely to reflect a cooling trend in the labor market, though accuracy may be affected by recent bad weather conditions that impacted workers. Analysts also note that the strike at Boeing could weigh on the payroll data.

Regardless of this report, there are underlying signs that the labor market will continue to soften in the near term, with workers facing decreasing job opportunities as new hiring is concentrated in certain industries.

Wish you a profitable trading week.

This article was written by Gina Constantin at www.forexlive.com.

• Domestic sight deposits CHF 449.4 bn vs CHF 454.1 bn prior

Swiss sight deposits fell again in the past week, moving back in line with levels seen about two to three months back. SNB taking their foot off the pedal? Here’s the trend:

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx +0.4%
• Germany DAX +0.4%
• France CAC 40 +0.6%
• UK FTSE -0.1%
• Spain IBEX +0.6%
• Italy FTSE MIB +0.6%

The DAX looks poised to chase a run at fresh record highs once again amid the more optimistic start here. This comes with US futures also holding higher on the day. S&P 500 futures are up 0.5% currently. The more positive development in the Middle East here is in part helping, alongside a sharp drop in oil prices as well as such i.e. less inflation worries. WTI crude is down well over 4% to $68.45 on the day.

This article was written by Justin Low at www.forexlive.com.

It is reported that the incumbent ruling bloc is arranging to convene a special session in parliament to vote on the prime minister post. And that this will likely be arranged for 11 November i.e. two weeks from today. Just a bit of a heads up as Ishiba’s fate is now hanging in the balance after the weekend election.

If a new leader is chosen, Ishiba’s tenure as prime minister will be the shortest since World War II. The good news at least for him is that other political factions in Japan are quite fragmented and fractured at best. That could see him still limp away with leading the next coalition despite the disappointing election result, at least for now.

This article was written by Justin Low at www.forexlive.com.

Here’s a snapshot of dollar pairs as we look to get European morning trade underway today:

USD/JPY is still higher by 0.6% but is well off earlier highs at the end of Asia trading around 153.50-60 levels, with the pair now easing back towards its opening gap higher of 153.23 on the day. The yen is the laggard following the Japan election results over the weekend, which saw the ruling LDP party lost its outright majority in the lower house for the first time since 2009.

Despite that, it’s not likely to materially change the political landscape though as outlined here.

Besides that, the dollar is keeping steadier after some light extensions to the earlier ranges in the handover from Asia to Europe. Higher bond yields is still something to take note of, with 10-year Treasury yields up 4 bps to 4.28%.

That is keeping the dollar in a relatively decent spot, keeping up the momentum from the weeks before.

Looking to broader markets, US futures are also sitting comfortably higher with oil prices down as Middle East tensions ease. Meanwhile, gold is also down slightly but not really backing off too much from its record highs in the previous week. The precious metal is down just 0.3% to $2,740 currently.

This article was written by Justin Low at www.forexlive.com.

Global Markets:

•  Asian Stock Markets : Nikkei up 2.27%, Shanghai Composite up 0.07%, Hang Seng down 0.18% ASX up 0.16%
• Commodities : Gold at $2745.35 (-0.24%), Silver at $33.60 (-0.84%), Brent Oil at $72.64 (4.26%), WTI Oil at $68.69 (4.29%)
• Rates : US 10-year yield at 4.278, UK 10-year yield at 4.235, Germany 10-year yield at 2.291

News & Data:

• (USD) Core Retail Sales m/m  -0.7% vs 0.3% expected
• (USD) Core Retail Sales m/m  0.4%  vs 0.5% expected

Markets Update:

Japan’s Nikkei 225 and Topix indices rose on Monday, buoyed by a weaker yen amid political shifts, as the ruling Liberal Democratic Party (LDP) lost its parliamentary majority. The Nikkei gained 2.24%, leading Asian markets, while the Topix climbed 1.23%. The yen dropped 0.84% to 153.59. According to NHK, the LDP and coalition partner Komeito secured 215 of 465 seats, while opposition parties saw substantial gains.

Analysts suggest that this political uncertainty might influence the Bank of Japan’s (BOJ) decision on rate hikes. Izumi Devalier, chief Japan economist at Bank of America, noted that while instability could delay rate hikes, the BOJ might act due to the yen’s sustained weakness. Devalier suggested a rate hike could still be possible by December or January, contingent on currency movements.

Elsewhere in Asia, South Korea’s Kospi rose 0.61% and the Kosdaq increased by 1.02%. Australia’s S&P/ASX 200 edged up 0.17%. In contrast, Hong Kong’s Hang Seng fell 0.24%, and China’s CSI 300 declined 0.73% following a 27.1% year-on-year drop in China’s September industrial profits.

In the U.S., the Nasdaq Composite reached a new high of 18,518.61 on Friday, gaining 0.56%, led by tech stocks like Nvidia, Meta, Amazon, and Microsoft. However, the S&P 500 dipped by 0.03%, and the Dow Jones Industrial Average decreased by 0.61%.

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The post Monday 28th October 2024: Asian Markets Climb on Weak Yen and Japan’s Political Shift first appeared on IC Markets | Official Blog.