Macro: Sandcastle economics
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Morning Brew November 2 2023
Erik Schafhauser
Senior Relationship Manager
Summary: Higher for a little less long
Good Morning
The Federal Reserve left interest rates unchanged yesterday - as was expected. Jerome Powells comments were not very clear about the path going forward but when he was asked if the Fed maintained a bias towards hiking rates versus keeping policy on hold, he stated "that's the question we're asking. Should we hike more?" This was interpreted as dovish. There remains a slight chance of a hike in either December or January but the December 24 rate is being traded 80 basis points below the current level – more than three full cuts.
10 Year Yields fell to below 4.80 and tested the 4.70 before settling at 4.73 now. The USD Index initially tried to break above the 107 after the rate decision but retreated to 106.35., EURUSD is back above 1.06 but we need a break above 1.0635 for a clear signal. GBPUSD is 1.2180 and USDJPY 150.38.
Equities celebrated the hope the tightening cycle has ended, US Indexes rose more than 1%, AMD gained more than 10% on hopes top catch up against Nvidia. The US500 is testing the 4250, the US Tech 100 is at 14715 and the GER40 has breached the 15000.
The US earning season so far has been more positive than hoped, 80% of the S&P 500 Companies that have reported results so far have beat.
This Morning, , Novo Nordisk reported record sales and operating profits for the quarter but flagged continued restrictions on supplies of Wegovy
Shell reported in line with expectations but announced share buybacks of $3.5 billion over the next three months
Today’s focus will be on the Swiss CPI at 8:30, international PMI, German unemployment , the Bank of England at 13:00, key US Data at 13:30 and 15:00 before the Apple earnings after the close.For the Bank of England today, the probability of no action is 90%.
With the death toll in Gaza rising, the powder Keg in the middle east requires careful attention.
Key Events:
Thursday
- Data Germany PMI, Swiss CPI, DE 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,
Trade carefully.
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