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Morning Brew November 1 2023
Erik Schafhauser
Senior Relationship Manager
Summary: Welcome to November and FOMC day
Good Morning
Welcome to November and FOMC day before looking back at yesterday, and other items on the Agenda, here is Altheas conclusion for tonight and the link to her full piece. There is basically no chance of a rate adjustment by the Fed tonight at 19:00, there is a 0.5% chance of a hike priced in rate futures – the outlook will be key, Markets are pricing in a 29% chan. ce of a 25 basis point hike in December and a 35% chance of a 25 bps hike in January, for December 2024, three 25bps cuts from the current level are expected.
What does that mean for investors?
The US yield curve is poised to continue to bear-steepen, unless the market narrative shifts. Within this environment, we continue to favor the front part of the yield curve up to 3-year maturities and the 10-year tenor. Building a barbell will enable clients to take advantage of high yields in the front end while adding protection with 10-year US Treasuries in case a recession materializes.
Equities had a strong day yesterday but ended October on weak note: The S%P500 fell 2.2% in October, the Dow lost 1.4% and the NASDAQ 2.8%
Key Movers yesterday were Caterpillar, at -6.7% on a miss, Pinterest gained 19% on strong earnings., Nvidia lost 0.9% on a report that it will lose substantial revenue due to the US export restrictions, Tesla gained on a ruling on the Autopilot. Toyota more than doubled profits, helped by a weak yen and strong sales. AMD missed earnings yesterday but the stock changed little, the Close was 98.5 and the Aftermarket ended at 97.95.
The Germany 30 is testing the 14900 and needs to break above the 15000 for new impulses.
The Chinese Manufacturing PMI disappointed at 49.50 – 50.8 had been expected.
Ahead of the US rate decision, 10 Year yields are little changed but the USD Index is fairly strong. The Yen is very weak at more than 151 Yen per USD, the Euro fell to below 1.06 again, GBPUSD remains near 1.2150. Gold
Gold and Silver lost in value yesterday on golds failure to hold above the 2000 to currently trade 1979 and 22.65.
According to Reuters, Qatar has mediated an agreement between Egypt, Israel and Hamas, in coordination with the U.S., to allow for the movement of foreign passport holders and some critically injured people out of besieged Gaza.
Today will be driven by the FOMC Meeting and the US treasury`s finance plans, International PMI throughout the day, Earnings and geo-Politics.
Key PMI are UK 10:30, Canada 14:30, US 14:45(S&P) and 15:00 (ISM)
It looks like traders are trying to start the month optimistically – let us see how that works!
Key Events today
Wednesday
- Data International PMI, US Rate Decision
- Earnings Paypal, AirBnB, Qualcom, CVS
Thusday
- Data Germany PMI, Unemployment Rate, Bank of England Rate Decision, US Initial Jobless Claims, Factory Orders.
- Earnings Apple, Palantir, Shopify, Coinbase, Starbucks,
Friday
- Data EU Unemployment Rate, Nonfarm Payrolls
- Earnings Enbridge, RBI,