Morning Brew October 27 2023

Good Morning

Please bear in mind that due to the European Daylight Savings change, trading hours are different next week.

The US came with surprisingly strong data yesterday, the GDP was 4.9% vs 4.3% expected, Durable Goods orders were 4.7 vs 1.7% expected. The ECB neither changed rates nor suggested an imminent change in policy.

Despite the strong GDP & Durable Goods, yields came down and the 10 year is now at 4.85. The PCE yesterday was fairly moderate and this raised the hope that there might be a lower Inflation number coming out today at 14:30 CET may be lower than priced in. Economists expect 3.7% for the Yearly Core PCE Price Index and 3.4% for the Yearly PCE Price Index. Monthlies are both 0.3%.

Indexes gave up ground and Tech sold off further with the Dow -0.76%, the S&P -1.18%, and the Nasdaq -1.76% on higher for longer fears. This affected mainly growth stocks,  FANG lost 2.7%. Amazon gained app. 6 dollars after hours on good earnings. IBM gained against the trend and added 5%, UPS lowered it`s guidance and ended the day 5.9% lower wand Western Digital lost 9.3%. Tesla closed at 205, below support and Nvidia at 403 Volumes were app 10% above the 20 day average at 11.6 billion shares traded.

The Dollar Index is trading in severe swings, on October 24 we traded a low near 105,36, yesterday`s high was 106.90 and now we are trading at 106.57. EURUSD is 1.0567, GBPUSD 1.2136 and USDJPY is off the highs at 150.20. Gold remains near the 2000 resistance at 1987 and Silver is trading below the 23 at 22.90. Silver moved a 70 cent range yesterday. Japan’s Tokyo CPI came in above expectations, raising the odds of BOJ may adjust policy next week.

Oil rises on high tensions in the middle east with Brent up 1.5%.

MacroVoice's Erik Townsend & Patrick Ceresna welcome Ole S Hansen as this week’s guest. Ole says the bull market has paused in some commodities, but is set to continue. They also talk about crude oil and the debate over how big the Iran escalation risk is in the Israel conflict.

If you are interested to learn more about how to employ options, Koen wrote a long piece on different possibilities to trade the NASDAQ with Option strategies depending on your view. This offers very good guidance on the possibilities:

Headlines:

• Two U.S. fighter jets struck weapons and ammunition facilities in Syria on Friday in retaliation for attacks on U.S. forces by Iranian-backed militia
• Siemens Energy shares plunged nearly 40% on Thursday, after the group said it was in talks with the German government about state guarantees following big setbacks at its wind unit
• The Chinese foreign Minister will meet president Biden today after he stated yesterday that the US and China have disagreements and need "in-depth" and "comprehensive" dialogue to reduce misunderstandings and stabilize ties
• The Biden Administration and the House are in negotiations about a 106 bio aid package for Ukraine and Israel.

Fucus today will be on the PCE and the University of Michigan as a setup for the FOMC Week. A rate-change is basically off the table for the November meeting but a change in the further expectations will be key. For December 2024 we are now trading 3 full rate cuts.

Any development in the Middle East will continue to be closely watched.

Tade carefully.