US Equities: Stocks were sold off on Friday with NASDAQ 100 down 1.5% and the S&P 500 down 1.3%, breaking below its 200DMA as VIX rose further to 21.71. Real estate led the declines for the week, down 4.6% followed by consumer discretionary down 4.5% and the only two sectors to close the week in gains were consumer staples and energy, both up 0.7%. Earnings focus will be front and centre this week with Big Tech (Microsoft, Alphabet, Meta, IBM, Amazon) reporting in addition to Coca-Cola, Visa, Mastercard, Ford and others.
Fixed income: Treasuries were higher into the weekend, reversing from post-Powell lows of last week and as traders rejected new yield highs. 10-year yields closed at 4.91% after getting close to 5% earlier in the week, while 2-year yields closed at 5.07%.
China/HK Equities: CSI300 ended Friday down 0.65%, erasing all gains seen in the reopening rally as property sector overhang continues. Selling in tech names also underpinned and focus turns to bank earnings this week. China’s Central Bank pumped a record stimulus into the banking system to keep short-term prime loan rates steady amid the recent credit woes.
FX: Currency volatility was subdued on Friday amid lack of key data and improvement in risk sentiment with Hamas releasing two US hostages. AUDUSD continues to test a hold of the 0.63 handle and Q3 CPI this week will be key, while USDJPY spiked above 150 in Asia morning’s low liquidity before quickly reversing. GBPUSD reversed from 1.21 support to reach back above 1.2160 while EURUSD still struggling to break above 1.06. EURCHF pushing above 0.945 and USDCHF above 0.08930 amid improved risk sentiment.
Commodities: Crude oil prices ended lower on Friday but recorded a second consecutive weekly gain as the risk of supply disruptions hangs over the market given the risks of widening of the Israel-Hamas conflict. But risk sentiment seems to be taking a breather for now, as Israel has delayed its ground invasion in Gaza amid hostage talks. Safe haven bid in Gold also retreated with XAUUSD back at 1970 after getting in close sight of $2000 on Friday. Copper still testing $3.55 support amid rising LME inventories.
- UK retail sales was weaker than expected, coming in at -1.0% MoM ex-auto fuel vs. +0.6% prior and -0.4% expected.
- Fed speakers go into a blackout period this week. On Friday, Cleveland Fed president Loretta Mester (2024 voter) said that “From my forecast I would say we’re within one of the peak, then we can hold it there for a while.” Logan (2023 voter) said she has seen welcome progress on inflation but it is still too high and she is not yet convinced they are moving to 2% inflation, noting the economy continues to outperform and labour markets are still tight.
- Nikkei reported that BOJ has begun to discuss another tweak possibility in YCC. Move may be discussed at next policy meeting, though Nikkei said that some officials remain cautious and see a need to monitor wage increases.
Macro events: Bank of Israel Announcement, EZ Consumer Confidence (Oct), US National Activity Index (Oct)
In the news:
- Israel strikes Gaza, Lebanon overnight; Netanyahu convenes generals (Reuters)
- China launches investigation into iPhone maker Foxconn, says state media (FT)
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