MARKET WRAPS
Watch For:
ECB Survey of Monetary Analysts, EU Business & Consumer Surveys; Germany GDP, CPI data for Germany, North Rhine Westphalia, Bavaria, Brandenburg, Hesse, Baden-Wuerttemberg, Saxony; Italy foreign trade non-EU; UK money and credit, monetary & financial statistics, shop price index; trading updates from Clariant, Galp Energia, Pearson, Glencore, Aker Solutions, Airtel Africa
Opening Call:
Stock futures were lower at the start of the week, as the market awaits key central bank decisions. In Asia, stock benchmarks traded mixed; the dollar was steady; Treasury yields edged higher; oil futures fell; while gold strengthened.
Equities:
European stock futures fell early Monday, as traders gear up for a busy week, with key events including rate decisions from the Federal Reserve, the Bank of England and the Bank of Japan, as well as more corporate earnings.
Meanwhile, markets continue to watch for developments in the Middle East as Israeli ground operations pushed deeper into Gaza on Sunday.
Forex:
Sterling is likely to remain relatively unchanged after the Bank of England meeting on Thursday as markets expect the BOE to hold interest rates, Danske Bank said.
Going forward, however, the U.K. currency is expected to fall versus the euro in 2024 as the U.K. economy is expected to perform poorly compared to eurozone economy, Danske said. “We continue to forecast EUR/GBP to move modestly higher the coming year to 0.89.”
Bonds:
Treasury yields edged higher in Asia. Friday’s PCE inflation report “provided confirmation that the Fed’s monetary policy is continuing to reduce inflation over time, albeit slowly,” said Brian Pietrangelo, senior vice president and managing director of investment strategy for Key Private Bank, citing the core year-over-year rate.
“That said, in our view, the economy maintains decent momentum but is showing potential signs of slowing for 2024,” Pietrangelo said.
“We believe the Federal Reserve is highly likely to pause interest rate hikes next week given the directional slowing of PCE inflation to wait for additional data, including the Employment Situation next Friday, to consider for the December meeting.”
Energy:
Oil futures fell in Asian trading. With Israel’s ground offensive into Gaza off to a cautious start, a war premium on oil prices has continued to fall, taking Brent back below $90/barrel, Saxo Markets said.
However, markets remain on edge, with the U.S. seeing an elevated risk of regional spillover of the Israel-Hamas war, Saxo added.
Metals:
Gold prices rose, as the outlook for the yellow metal remains positive, given a broader risk-averse sentiment among investors.
With continued geopolitical tensions in the Middle East, investors view gold as a safe haven. The rising gold prices are helping offset headwinds from currency and bond markets, ANZ said.
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Copper edged higher amid signs of recovery in parts of China’s economy. Last week, data showed that China’s industrial profits rose for a second month in September, ANZ said. These are emerging signals of a recovery in key sectors of the country’s economy, added ANZ.
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Iron ore prices rose amid better market sentiment. Macroeconomic expectations and sentiment have improved after China’s issuance of CNY1 trillion in central government bonds, Huatai Futures said.
TODAY’S TOP HEADLINES
Does Strong Growth Fuel Inflation? Fed Debates Whether Old Model Still Applies
Since Federal Reserve officials last raised interest rates in July, the economy is doing two things that central bankers don’t think it can sustain much longer: revving up activity and at the same time slowing inflation.
It has set off a debate within the central bank about how closely it should follow its traditional models of the economy. The debate is unlikely to affect the outcome of its meeting this week, when the Fed is set to hold interest rates steady to provide more time to see the effects of their rapid increases over the past two years.
‘Buy the Dip’ Investing Mantra Lives On-in the Bond Market at Least
One of the hottest investments on Wall Street is something of a surprise-it’s a battered long-dated Treasury bond fund.
Shares of the iShares 20+ Year Treasury Bond ETF are near a 16-year low and have lost more than half their value from their 2020 peak, but investors are piling in. They added more than $2 billion to the fund on Tuesday and Wednesday alone, bringing its total inflows for the year to $21 billion.
U.S., China Agree in Principle to Biden-Xi Summit
WASHINGTON-China and the U.S. moved closer to holding a summit between President Biden and Chinese leader Xi Jinping after months of careful diplomatic maneuvering to repair ties.
Two days of meetings between Biden, members of his national security team and Chinese Foreign Minister Wang Yi this week yielded “an agreement in principle” for a summit in San Francisco next month, a U.S. official said Saturday. China’s Foreign Ministry, in its assessment of Wang’s meetings, said, “The two sides agreed to work together to achieve a meeting of the two heads of state in San Francisco.”
Australia, European Union Free-Trade Talks Stall
Australia failed to finalize a free-trade agreement with the European Union during negotiations in Japan at the weekend, Australian Trade Minister Don Farrell said Monday.
“I came to Osaka with the intention to finalize a free-trade agreement with the European Union,” Farrell said in a statement. “Unfortunately we have not been able to make progress.”
Israeli Ground Operation Pushes Deeper Into Gaza
Israeli soldiers pushed at least 2 miles deep into the densely populated Gaza Strip Sunday in moves that analysts said seemed designed to trap Hamas in the enclave’s north, as the U.S. pressured Israel to restore communications in the territory.
Soldiers and tanks appeared to be taking up positions deep inside Gaza on Sunday, two days after Prime Minister Benjamin Netanyahu said the country was entering a new phase of the war. Tanks fired from Gaza’s Mediterranean beaches, and soldiers moved across open and hilly ground, according to video the military released.
Netanyahu Fights for His Political Survival
TEL AVIV-Israel’s Prime Minister Benjamin Netanyahu issued a rare apology Sunday that inadvertently framed the political crisis that has engulfed him.
A few hours earlier, facing mounting criticism for the Hamas attacks that killed 1,400 Israelis, he publicly blamed the security failures on Israel’s defense and intelligence services. He hadn’t been warned of Hamas’s intention to start a war, he wrote in a tweet on X, saying that defense and intelligence officials had “assessed that Hamas was deterred.”
Wars Push Up Demand for Weapons, Sparking Fears of Shortages
ARLANDASTAD, Sweden-Western defense officials worry that with Israel going to war as the West battles Russia by proxy in Ukraine, there won’t be enough artillery shells and other weapons to keep both allies in the fight.
The issue is concerning NATO planners even though Israel isn’t a member of the alliance and few European countries supply it with military equipment.
Palestinian Death Statistics, Doubted by the U.S., Remain a Subject of Controversy
Three weeks into Israel’s massive bombing campaign in the Gaza Strip, the exact scope of Palestinian casualties has become yet another controversy after President Biden questioned statistics published by the Hamas-run Gaza health authorities.
The Gaza-based Palestinian Health Ministry said Saturday that the death toll has topped 7,703, including 1,863 women and 3,195 children, information it says is based on data compiled by hospitals. The United Nations, which verified and documented deaths in previous conflicts in Gaza, says it is unable to do so now because of the sheer scope of violence.
SodaStream Built a Factory for Israelis and Palestinians to Work Together. Then a War Erupted.
In a factory in Israel not far from the Gaza border, Jews and Arabs have for years worked side by side making SodaStream seltzer machines for homes around the world.
Together, the colleagues feasted at Ramadan and lighted candles for Hanukkah. They visited one another’s homes and attended the weddings and funerals of their co-workers’ family members. Throughout past conflicts in the region, they have called their workplace an “island of peace.”
TikTok Gets Tougher in Performance Reviews, and Employees Are Spooked
SINGAPORE-TikTok is asking managers across the world to give more employees lower ratings in performance reviews, a move that staff fear could reduce bonuses and lead to layoffs, people familiar with the matter said.
In mid-October, managers were told by senior management and staff in human resources that they needed to assign more performance reviews at the lower end of the company’s bell-curve rating system, employees managing teams in the U.S., Singapore and China told The Wall Street Journal. This could double or triple the number of subpar grades given on some teams this year, the people said.
HSBC Holdings Third-Quarter Net Profit More Than Doubled
HSBC Holdings PLC’s third-quarter net profit more than doubled as the London-based banking giant continued to benefit from higher interest rates and sharply higher noninterest income.
The Asia-focused lender posted net profit of $5.62 billion for the three months to Sept. 30, up from $2.00 billion in the year-earlier period, it said Monday. HSBC’s pretax profit, the bank’s preferred profit measure, rose to $7.71 billion from $3.23 billion.
BHP Iron Ore Train Drivers Threaten Strike Action in Pay Dispute
Train drivers at BHP Group’s Australian iron-ore operations have voted in favor of strike action in a dispute over pay and conditions, a union representing the workers said Monday.
(MORE TO FOLLOW) Dow Jones Newswires
October 30, 2023 01:15 ET (05:15 GMT)
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