Senior Relationship Manager
Summary: Dovish Dreams Shattered
Good Morning
A rather hawkish Powell weighed on risk sentiment, pushing equities lower and the USD higher. Chapeaux to our strats team who called it perfectly in the morning podcast.
Initially Powell had sounded rather dovish but two comments reversed that sentiment: ULTIMATE LEVEL OF RATES WILL BE HIGHER THAN PREVIOUSLY EXPECTED and FED'S POWELL: HISTORICAL RECORD CAUTIONS STRONGLY AGAINST PREMATURELY LOOSENING
As Steen Jakobsen points out, there are two conditions under which the Fed would pause it`s hikes:
- both are not the case – to the contrary.
The Fed had hiked rates by 75 basis points as expected but the outlook for the next year shifted somewhat, yesterday peak rates were expected at 5% in May, now it is 5.1% in May / June. US 10 Years rose to 4.10 and the USD Index exceeded 112 again.
EURUSD fell to 0.9815, GBPUSD 1.1395, USDJPY rose to 147.50, Gold and Silver are trading 1634 and 19.25.
Rate sensitive stocks were the biggest losers with the Dow down 1.55%, the S&P 500 2.50% and the Nasdaq 3.36%, Tesla gave up 5.6%, Apple 3.7% and Alphabet 86.7%.
Employment will continue to be in focus, todays initial Jobless claims and tomorrows Nonfarm Payroll. Continuing claims are expected at 1.4 mio and the Nonfarm tomorrow at 200k.
Also in focus will be the Bank of England (13:00) and the Norwegian Central Bank (10:00) today, clearly expected to deliver a hike by 75 bps, the largest since 1989. The Bank of England is in a terrible place with Inflation at a 40 year high and the economy in recession.
Headlines:
Oil rallied for several reasons – firstly OPEC rose its forecasts for world oil demand in the medium to longer term, saying that $12.1 trillion of investment is needed to meet this demand and an EIA report showed US gasoline inventories fell to the lowest since 2014.
Maersk, the world’s largest owner of container ships, said it expects global container demand to decline by up to 4% this year from an earlier estimate of +/- 1%. It also warned that next year could be worse.
Wheat loses as Russia to resume grain deal participation
Economic data:
Thursday: UK PMI and Rate decision, EU Unemployment, US PMI,
Friday; EU PMI, US Nonfarm Payrolls
Earnings:
Thursday: ConocoPhillips Cigna Corp, Amgen, Paypal, Starbucks, EOG, DBS,
The end of the road
Emboldened by surging crude oil prices, Saudi Arabia makes waves on the international stage, as Crown Prince Mohammed bin Salman manages to create a World Champions League, after buying the UEFA Champion League franchise.
As the world embraces GLP-1 obesity wonder drugs, the people next in line to get a prescription stop caring about dieting and exercising, figuring that the drug will later solve all of their weight-related health problems.
With the US budget deficit spiraling above 10% of the GDP, the government is desperate to foster demand for US Treasuries. Under intense pressure from the White House, Congress makes income from government bonds tax-free.
After a criminal group deploys the most deceptive AI deepfake ever seen, generative AI becomes a national security threat. With public distrust soaring, governments crack down with harsh new laws, puncturing the AI hype.
To fix the divergence in the global trade and financial system, the largest deficit countries unite to negotiate new world trade terms. For surplus countries, the reset of the global economic model is a painful adjustment.
As discontent with Biden and Trump rises to fever pitch, Robert F. Kennedy Jr sees his support rising inexorably in the polls. On November 5, Kennedy wins the US presidential election, ushering in a new era in US politics.
Stepping up Japan's economic transformation in 2024, PM Kishida brings in a host of populist policies to boost domestic demand. As the GDP growth rate hits 7%, the BoJ is forced to abandons its yield curve control policy.
As people wake up to how little tax Europe’s billionaires are actually paying, the EU Commission implements a wealth tax of 2%. The tax sends shockwaves through Europe's luxury industry, with luxury giant LVMH plunging 40%.