US Equities: Stocks staged a broad-based rally after Chicago Fed President Goolsbee lent his support to the notion of reducing inflation without triggering a recession. Shares in automakers gained ground as the labor union scaled back its wage demands. Megacap tech names also delivered strong performances. In the semiconductor space, AMD surged by 4.9% and Nvidia added 1.5%, while Micron lost 4.4%. The S&P500 concluded the session 0.6% higher at 4,299 and the Nasdaq 100 gained 0.8%, bouncing to 14,702. During extended hours, Nike surged over 8% after reporting earnings, gross margins and inventory cuts that exceeded street estimates.
Fixed income: The short end of the curve caught a bid on dovish Fedspeak and a large decline in pending home sales, seeing the 2-year yield fall by 8bps to 5.06%. The demand for the USD37 billion 7-year note auction was lackluster but had a minimal impact on the market. The 10-year yield fell 3bps to 4.57%, after once reaching as high as 4.69% during the day.
China/HK Equities: The Hang Seng Index and CSI300 had another day of declines, with drops of 1.4% and 0.3%, respectively. China Evergrande suspended trading following a series of adverse developments, including the founder's placement under police control, which garnered headlines. Additionally, the readout from the Politburo meeting and the headline that Inner Mongolia has been granted permission to issue "refinancing bonds" for the purpose of repaying hidden local government debts failed to generate any market enthusiasm. It's worth noting that mainland bourses are closed today and next week due to the observance of the Mid-Autumn Festival and National Day holidays.
FX: Dollar reversed slightly with Treasury yields reaching a peak, but the DXY index remained above 106. SEK was the outperformer again, followed by AUD and CHF. AUDUSD rallied over 0.64 and RBA meeting next week will be eyed. EURUSD also bounced higher from the 1.05 with EZ yields remaining firmer despite the softer German inflation, and recaptured 1.0560 although EURCHF is seen sliding again this morning in Asia. USDJPY eased yesterday but upside pressures towards 149.40 returned this morning.
Commodities: Oil prices eased from their recent highs despite a softer dollar and focus turns to US PCE data due today. Gold came under further pressure, and $1850 may be the next target, while Copper rose higher amid a softer dollar.
- Final US Q2 GDP was unrevised at 2.1% but consumer spending was revised sharply lower to 0.8% from 1.7% which was offset by upward revisions in non-residential fixed investment, exports, and inventory investment. While the data is stale, it is reflective of the deterioration in the state of the consumer that could start to be a bigger concern going into Q4.
- Initial jobless claims were at 204k in the week ending September 23, a similar level to the prior 202k and beneath expectations of 215k, yet again signalling that the pace of cooling in the labor market is very modest.
- Fed’s Goolsbee (voter) was rather dovish, noting that inflation could reach target soon without further policy tightening.
- German HICP inflation eased to 4.3% YoY in September from 6.4% previously, and was at its slowest in two years.
- According to a survey conducted by the Cheung Kong Graduate School of Business in August and September, Chinese investors anticipate a 0.2% decrease in housing prices over the next 12 months (compared to a 0.7% increase in the Q2 survey). Additionally, the percentage of respondents expressing interest in investing in precious metals rose to 11.6% in Q3 from 9.8% in Q2.
- Japan’s Tokyo CPI was higher than expected on the headline print, coming in at 2.8% YoY vs. 2.7% expected but cooling from 2.9% prior. Core and core-core measures were softer than expected, creating little urgency for the BOJ to remove its massive stimulus.
- UK GDP (Q2 F) 0.2% QoQ vs. 0.2% prior (1400 SGT), EZ Flash HICP (Sep) 4.8% YoY vs. 5.3% prior (1700 SGT), US PCE Price Index (Aug) core 3.9% YoY vs. 4.2% prior (2030 SGT)
- China’s NBS manufacturing PMI and non-manufacturing PMI are scheduled to be released on Saturday, September 30; Caixin China PMI and Services PMI are set to be released on Sunday, October 1. For a preview, read here.
In the news:
- Nike jumps as inventory glut eases, profit beats estimates (Bloomberg)
- Evergrande announced that founder and Chairman Hui Ka Yan “has been subject to mandatory measures in accordance with the law due to suspicion of illegal crimes” (Company announcement)
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