• GLOBAL CAPITAL MARKETS OVERVIEW:
The U.S. stock market closed down on Wednesday. The Dow Jones index fell by about 90 points, the S&P index fell only 0.2%, and the Nasdaq index turned positive. Earlier it was reported that Senate Minority Leader Mitch McConnell was in a private meeting of Republicans. He said that he would propose to extend the short-term debt ceiling later on Wednesday. This will help relieve Congress's pressure to avoid the US default that is currently expected to occur on October 18. At the same time, the ADP report shows that companies have added the most jobs in three months. Friday's employment data is expected to show that the labor market is still recovering strongly, which provides a basis for the Fed to reduce jobs ahead of schedule. European stock markets fell sharply on Wednesday. The Frankfurt DAX fell 1.6% to 14,959 points, the lowest since May 4, due to inflation concerns and weak economic data. German factory orders in August fell by 7.7% from the previous month, far higher than the 2.1% market forecast. In addition, the Purchasing Managers Index (PMI) data showed that the German construction industry contracted in the 19th month, albeit at a slower pace. At the same time, the German 10-year government bond yield, which is the benchmark for the eurozone, rose by four basis points to -0.147%, the highest since the end of June. On the political front, formal joint negotiations between the Social Democratic Party, the Green Party, and the pro-business Liberal Democratic Party to form the next German government may begin as soon as the parties give the green light on Wednesday. German software development company TeamViewer fell more than 25% in a single stock after the company lowered its full-year guidance and announced weaker-than-expected quarterly results. CAC 40 fell 1.3% on Wednesday to close at 6493 points, the same as its European counterparts, due to concerns that rising inflationary pressures may force major central banks to take action as soon as possible, as well as financial turmoil in China's real estate industry. In terms of data, a PMI survey showed that the French construction industry contracted for the fourth consecutive month in September, although not as severe as August. Among individual stocks, Unibail Rodamco, ArcelorMittal, and Renault saw the most significant declines. On Wednesday, the FTSE 100 Index fell 81 points, or 1.2%, to 6,996 points, the lowest since September 21, as the soaring energy prices intensified inflation concerns. Energy stocks and mining stocks fell the most, at 2.6% and 1.7%, respectively. In terms of data, recent data show that due to supply chain problems and weak demand, the total output of the construction industry only expanded moderately in September, and the recovery rate was the lowest in eight months. At the same time, supermarket chain Tesco raised its full-year forecast after solid earnings in the first half of the year, up nearly 6%. The FTSE MIB fell 1.4% on Wednesday to close at 25,606 points. It rose 2% on the previous trading day and was flat with its European counterparts. Continued concerns about slowing global economic activity and rising inflation triggered a rebound in government bonds, with the yield on Italian 10-year government bonds rising by seven basis points to 0.928%. On the corporate side, as the price of crude oil fell to US$77 per barrel, Tenaris SA (-4.3%), Saipem (-4.2%) and Eni ( -1.5%), and other oil stocks led the decline. Nikkei 225 Index plummeted 293 points, or 1.05%, to close at 27,529 baht, the lowest closing point since August 23. The International Monetary Fund reported that this year’s global economic forecast was lowered to slightly less than 6%. Continued worries about inflation after oil prices reached multi-year highs dragged down. In addition, the approval rate of the new Japanese prime minister is lower than the approval rate of his predecessor, Naoyoshi Suga, when he took office last year. At his first press conference, Kishida Fumio said that adjusting the country’s fiscal income tax would be one of the options to resolve the income gap. Traders are currently waiting for the US employment data to be released on Friday, which may reveal the Fed's next move. Mitsubishi Motors Corp. fell 7.23%, and SoftBank fell 2.07%. Australian Stock Exchange 200 Index fell 42 points, or 0.58%, to close at 7206 points, falling for the second consecutive trading day. The market is worried that rising oil prices and supply chain disruption may lead to continued global inflationary pressures. Stricter loan regulation has also dragged down risk appetite. Australian banking regulators said that soaring house prices pose a risk to financial stability. Regarding the pandemic, the rate of new infections in Victoria and New South Wales has declined because the authorities have begun to relax stringent control measures as vaccination rates have risen. After an Australian law firm filed a class-action lawsuit against A2 Milk Company on behalf of investors, A2 Milk Company's stock price fell by 7.68%. At the same time, Flight Center Tourism Group fell 6.63%.
• REVIEWING ECONOMIC DATA:
Looking at the last economic data:
- RU: Russia’s annual inflation rate rose from 6.7% last month to 7.4% in September 2021, higher than market expectations of 7.1%. This is the highest inflation rate since June 2016, as food prices (9.2% vs. 7.7% in August), non-food (8.1% vs. 8.0%), and services (4.2% vs. 3.8%) have accelerated. After rising 0.2% in August, monthly consumer prices rose 0.6%.
- US: In September 2021, private companies in the United States hired 568,000 employees, the most in three months, while the August data was revised downward by 340,000, exceeding market expectations for an increase of 428,000. The leisure and hotel industry created the most jobs (266,000), followed by education and health (66,000); professional and business (61,000); trade, transportation, and public utilities (54,000); financial activities (22,000) ); and information (11000). The commodity production sector added 102,000 jobs, with manufacturing (49,000) ranking first, construction (46,000), and natural resources and mining (7,000 people). Companies with 500 or more employees added the most jobs (390,000), followed by medium-sized companies (115,000) and small companies (63,000).
- SW: In August 2021, Swedish household consumption fell 1.1% from the previous month and increased 0.8% last month. This is the first decline in spending since April due to the decrease in consumption of restaurants, cafes, goods and services (41.7% in July, down 10.2%); post and telecommunications (down 5.5% vs. 0.1%); automobile transportation, Retail, and service industries (-2.2% versus -0.4%) and food and beverage industries (-0.1% versus -1%).
- TW: Taiwan’s annual inflation rate rose from a downwardly revised 2.35% last month to 2.63% in September 2021, higher than market expectations of 2.2%. This is the highest inflation rate since February 2011, as the price of transportation and communication has increased faster (7.2% in August and 6.5% in August); clothing (2.84% vs. 1.1%); and housing (1.4% vs. 1.2%) %); health (0.32 vs. 0.15); and education and entertainment (2.8% vs. 1.1%). At the same time, the inflation rate for public utilities remained almost unchanged at 1.93%, while the inflation rate for food slowed down (3.5% and 3.8%, respectively). Seasonally adjusted monthly data shows that consumer prices rose 0.5% after rising 0.3% in August.
- UK: The IHS Markit/CIPS UK Construction PMI fell to 52.6 in September 2021, lower than the market expectation of 54.0 and further away from the 24-year high in June. The latest data show that due to supply chain issues and weak demand, the total output of the construction industry has only expanded moderately, and the recovery rate is the lowest in eight months. The most significant slowdown is in civil engineering, and since June 2020, the growth of housing construction has slowed. Since the beginning of 2021, the total number of new jobs has increased the least, and the increase in staffing levels has also been the least obvious since April. In terms of prices, purchase prices have overgrown, albeit at a slower rate. Finally, business sentiment weakened in September as some people worried that the supply chain crisis would hinder growth.
- HK: The IHS MARIT Hong Kong PMI fell from 53.3 in August to a low of 51.7 months in September 2021. Nonetheless, this marks the eighth consecutive month of growth in private sector activity, supported by the stable COVID-19 pandemic, with output and new orders continuing to grow. At the same time, the staffing level has remained almost unchanged, and outstanding work has accumulated again. Foreign demand, including China, remains weak, falling for the fourth consecutive month, and the decline is faster than in August. At the same time, the increase in purchase levels was the largest since November 2017, leading to a substantial increase in stocks or purchases. The supplier’s delivery time continued to be extended for the fifth consecutive month. In terms of costs, overall input price inflation continues to exceed output costs, indicating that profit margins are under pressure. Finally, market sentiment eased sharply
• LOOKING AHEAD:
Today, investors will receive:
- USD: Challenger Job Cuts y/y, Unemployment Claims, FOMC Member Williams Speaks, Natural Gas Storage, and Consumer Credit m/m.
- EUR: German Industrial Production m/m, French Trade Balance, Italian Retail Sales m/m, Spanish 10-y Bond Auction, French 10-y Bond Auction, and ECB Monetary Policy Meeting Accounts.
- GBP: Halifax HPI m/m.
- CHF: Unemployment Rate and Foreign Currency Reserves.
- AUD: AIG Services Index.
- CNY: Bank Holiday.
- JPY: Leading Indicators.
- CAD: Ivey PMI, and BOC Gov Macklem Speaks.
• KEY EQUITY & BOND MARKET DRIVERS:
- German DAXIndex drops to a 20-week low of 14826.
- The benchmark US 10-year Treasury bond yield erased the early gains and fell back to 1.5% on Wednesday. It once touched 1.56% in early trading, the highest level since June 16. Energy prices, including oil and natural gas, have fallen from recent highs, alleviating some concerns about soaring inflation. Nevertheless, as the economic recovery continues, it is increasingly likely that the Fed will begin to decrease gradually next month, and yields are still rising. In addition, the ADP report shows that the private sector has added the most jobs in three months. All eyes are now on the employment report released on Friday, which is expected to show that the labor market recovery is still strong.
The benchmark Japanese 10-year Treasury bond yield jumped to a 17-week high of 0.08%, following the U.S. Treasury bond yield rose to a 4-month high. Due to soaring energy prices, the Fed's reasons for slowing down its asset purchase plan strengthened. At the same time, the governor of the Bank of Japan stated that wage pressures had been brought under control because companies have insisted on the tradition of retaining jobs and lowering wages during the epidemic-related crisis. In addition, the new Minister of Finance of Japan stated that he would continue to implement monetary and fiscal stimulus measures while calling on the Governor of the Bank of Japan to ensure the stability of the market and corporate financing.
- PepsiCo (PEP) shares were up 1% and outperformed the market. The day before, the company reported its financial results for the III quarter: revenue grew by 11.6% y / y and reached $ 20.19 billion, exceeding the consensus forecast by $ 800 million. Adjusted earnings per share were $ 1.79, which turned out to be $ 0. 06 above market expectations. PepsiCo predicts 8% organic revenue growth in 2021, up 2% from its previous forecast of 6%. EPS is expected to be at least $ 6.20, with a consensus at $ 6.24. A diversified portfolio of strong brands with high pricing power will enable PepsiCo to deliver sustainable organic sales growth amid rising cost inflation.
- Acuity Brands (AYI) Shares Up 12% After Strong Quarterly Earnings Report.
- American Airlines (AAL) and JetBlue (JBLU) Shares Down More Than 4% After Goldman Sachs Downgrade.
- CDW Corp. (CDW) and Seagate Technology Holdings (STX) lost almost 6% after downgrading by Morgan Stanley.
- Cryptocurrency stocks rose in price amid rising bitcoin prices, which exceeded $ 55,000 for the first time since May.
- FMC (FMC) shares fell 3% after downgrading by Bank of America.
- Ginkgo Bioworks (DNA) Shares Down 19% After Scorpion Capital Tells It Betting On A Reduction.
- Gogo (GOGO) shares lost 10% after downgrading by Morgan Stanley.
- Manchester United (MANU) shares fell 11% after news that club owners put up a $ 186 million stake for sale.
- MarketAxess (MKTX) shares lost 5% after the company's September sales report, which seemed weak to analysts.
- Palantir (PLTR) Shares Up 5% After US Armed Forces Contract News.
- Southwest Gas Holdings Inc. (SWX) lost 3% after agreeing to buy Questar Pipelines from Dominion Energy.
- US Steel (X) shares fell 7% after Goldman Sachs downgraded to SELL.
• STOCK MARKET SECTORS:
- High: Utilities, Consumer Staples, Real Estate.
- Low: Energy, Materials, Health Care.
• TOP CURRENCY & COMMODITIES MARKET DRIVERS:
- COMMODITIES: Precious metals markets were bullish last week, except for gold, which received support from declining US Treasury yields. The strengthening of the dollar also stopped, and the decline in stock markets intensified, which increased interest in defensive assets. The rhetoric of central bank officials showed mixed sentiment, to which the market reacted with increased metal purchases. Platinoid markets continued to decline, driven by declining demand from the automotive industry. This week will again be marked by many speeches by representatives of almost all significant regulators, which will leave volatility at a high level. China is celebrating Golden Week, and the markets are closed. In a speech to the Senate Banking Committee, US Federal Reserve Chairman Jerome Powell said that the Fed would continue to buy $ 120 billion in assets a month until a "significant further outlook" is reached in moving towards unemployment and inflation targets. However, the bar for raising interest rates is higher. He mentioned that supply constraints are the main reason for the rise in prices and expressed confidence in slowing inflation. However, the speeches of the representatives of the US Federal Reserve did not differ in uniformity of opinion. St. Louis Fed President James Bullard said high inflation could require more aggressive moves by the regulator, including two interest rate hikes in 2022. At the same time, Chicago Fed President Charles Evans said supply shocks, which are now driving growth prices, will weaken next year, and low-interest rates will still be needed to bring US inflation back to a steady 2% level. The scandal with the trade in the financial markets of the Fed members resulted in the departure of the presidents of two FRBs - Dallas (Robert Kaplan) and Boston (Eric Rosengren), which differed in belonging to the "hawk camp." However, they did not have the right to vote in 2021 by rearranging representatives of a more “dovish” position. The general increase in interest rates may not be as aggressive as previously expected. Moreover, the replacement of Fed Chairman Jerome Powell in February 2022 with a more loyal representative of the weak position could also help soften the overall position. The dynamics of gold prices partly reflect the ongoing processes. The speed of the tightening of stimulus programs and subsequent hikes in interest rates may not be as fast as expected, which will support the gold market. ECB President Christine Lagarde, during the ECB conference, tried to temper anxiety about inflation and warned against overreacting to a temporary surge in prices, still clarifying that he sees no signs of accelerating inflation across the economy. The Bank of China said that it will maintain the ordinary monetary policy as long as possible and that the yield curve may also maintain a regular and upward shape. The bank estimates the potential growth rates of the Chinese economy at 5-6%. The IMF data showed that in September 2021, the share of gold in the reserves of the Bank of Kazakhstan (+5.3 tons to 397.67 tons), the Bank of Uzbekistan (+8.7 tons to 375.1 tons) increased. Gold was sold by the Bank of Turkey (-7.8 tons to 703.18 tons), the Bank of Australia (-2.0 tons to 71.85 tons). The Bank of Russia did not conduct gold transactions in September 2021. The demand for physical gold in Asian hubs continued to rise in the previous week amid falling prices. In India, dealers were selling gold at a $ 4.0 / oz premium, demand remained moderate due to volatile prices, but dealers are expecting a pickup during the Dussehra festival. Gold imports to India in September amounted to 91 tons against 12 tons a year earlier. In China, gold premiums rose to $ 12.0 / oz, while demand continued to rise amid falling metal prices and the Evergrande crisis. Many investors turned to buy gold, shifting part of the portfolio into gold. In August, net gold imports to China via Hong Kong fell 1.4% m / m to 21.8 tons. Growth in retail demand allows us to expect an increase in gold imports to China in September. In Hong Kong, gold was offered at a premium of $ 0.5-0.8 / oz. In Singapore, premiums did not change from the level of $ 1.2-1.6 / oz. Demand continued to grow amid falling prices and widespread holidays. There was also a significant increase in demand for silver. In Japan, gold was offered at a premium of $ 0.5 / oz to London prices. Gold prices last week rose from the level of $ 1,722 / oz to $ 1,769 / oz, but so far, they have not been able to go up the intense level of $ 1,770 / oz and dropped to $ 1,758 / oz. Growing demand for physical gold in Asia continued to support prices, with many long-term investors buying gold to hedge against inflation and economic risks. BofA's weekly survey showed a $ 0.6 billion outflow from gold funds. Silver prices last week in correlation with the gold market rose from $ 21.50 / oz to $ 22.55 / oz. The price ratio between gold and silver was 78.06 (5-year average - 79.50). The platinum/silver ratio is 42.11. The funds managed by the most extensive ETFs investing in gold dropped 0.2% over the past week, while those investing in silver rose 0.9%.Last week, the platinum market retained high price volatility, which fluctuated in the range of $ 980-940 / oz in correlation with the gold market. The spread between gold and platinum widened to $ 802 / oz, between palladium and platinum narrowed to $ 938 / oz. The price of palladium during the week has grown from $ 1,835 / oz to $ 1,906 / oz. investors removed the excessive oversold of the market. The released statistics sent conflicting signals to the platinoid markets. In July and August 2021, the number of registered commercial vehicles in the EU decreased by 11.9% and 5.4% YoY for two consecutive months. Hong Kong's palladium imports in August rose 166% to 197 Koz, the highest since October 2019. Over the past period, investments in the most extensive ETFs in platinum have remained unchanged, and those investing in palladium have declined by 1.9%.
- EUR: The euro fell to US$1.15 in early October, hovering near its lowest point since July 2020, due to concerns about inflationary pressures from rising energy prices and the prospect of global policy tightening. The Federal Reserve may begin to reduce asset purchases in November and raise interest rates next year, while the Bank of England may raise interest rates as early as this year. At the same time, the President of the European Central Bank, Christine Lagarde, reiterated that the recent increase in inflation is considered temporary, repeating the central bank’s statement that price pressures will ease next year. Recent comments by Robert Holzmann and Francois Villeroy de Galhau hint at subtle tone shifts.
• CHART OF THE DAY:
Brent crude prices rose to $ 83.47 / bbl on Wednesday, another update to a 3-year high. At the same time, American WTI oil has been trading at highs since November 2014. However, by the evening, they began to decline and tested $ 81 / bbl. (Brent). Thus, Tuesday's growth was eliminated. In technical analysis, this is called bearish engulfing. Oil at $ 100 a barrel will not provide a "stable state" of the market, Iraqi Oil Minister Ihsan Abdul Jabbar said during an Energy Intelligence forum on Wednesday. In his opinion, the oil price of $ 75- $ 80 will be fair for everyone. At the same time, the country expects its export potential to reach 6 million b / d by the end of 2024, and by the end of 2027, Iraq plans to produce 8 million b / d. The Energy Information Administration published in the evening a weekly report on US oil and petroleum product inventories. The figures did not support the resumption of growth in oil prices. Crude oil inventories rose by 2.35 million barrels, significantly higher than energy market experts' forecasts. By 1.6 million barrels. Stocks increased at Cushing. Gasoline inventories rose by 3.26 million barrels, although a decline was predicted. As a result, crude oil reserves are currently around 421 million barrels, which is approximately 7% below the 5-year average for the current time. US oil production rose from 11.1 to 11.1 million BPD but remained below 11.5 million BPD in the August week before the impact of Hurricane Ida. Gas prices in Europe, judging, for example, by the gas futures quotes of the Dutch hub TTF, soared to a staggering price of 162.1 euros / MWh. This is equivalent to about 1950 per cubic meter. Then prices fell sharply to 1200 per cubic meter, which was an absolute record on October 1. Of course, we see cold weather at the start of the heating season in Europe, which is a depressing situation, because gas storage facilities in Europe will not be properly filled this year, so we can only hope for warm weather. But even with this in mind, a correction is long overdue in the market, since the rally of recent days has been more emotional than the economy. The reason for the correction was the comments of the President of the Russian Federation, who noted that for nine months of this year, Gazprom increased these gas supplies through the transport system of Ukraine by more than 8% "and by the end of the year, the obligations for supplies through the territory of Ukraine will be exceeded. Brent, $ / bar. - 81.35 (-1.47%), WTI, $ / bar. - 77.77 (-1.47%), Urals, $ / bar. - 79.63 (-1.91%).• Brent Crude oil - D1, Resistance (target zone) around ~ 77.94, 86.69, Support (consolidation) around ~ 77.94, 70.50 & 67.40.