Equities continued yesterdays rebound in steady progress. Gold slips, T-bills yields rise as US jobless claims decline

• GLOBAL CAPITAL MARKETS OVERVIEW:

The US stock market continued its gains on Thursday, with the three major stock indexes rising about 1.5%. Senate Majority Leader Chuck Schumer announced that legislators had reached an agreement to extend the debt ceiling until early December. At the same time, energy prices have fallen from recent highs, alleviating some concerns about the global energy crisis. Traders are currently waiting for the highly anticipated employment report, which will be released, to understand the latest situation of the labor market recovery. Strong employment data will increase the possibility of the Fed cutting production and raising interest rates early. At the same time, the claim report showed that the first claim last week dropped more than expected. European stock markets rebounded strongly on Thursday, with the Frankfurt DAX index rising 1.8% to a one-week high of 15,246 points after lawmakers reached an agreement on the short-term debt limit extension, which eased concerns about a US default. Auto and mining stocks contributed the most to the gains, up about 3%. After Russia said it would increase natural gas exports to Europe, the energy market stabilized, pushing down the eurozone bond yields. In terms of data, Germany's industrial production in August fell by 4% from the previous month, a drop that exceeded expectations, most of which came from capital goods production. On Thursday, the FTSE MIB index rose 1.5% to close at 25,992 points, recovering from the 1.4% drop in the previous trading day. The reason was that debt defaults were alleviated after the US Congress agreed to raise the debt ceiling in the short term, and continued inflation concerns eased. After Russian President Vladimir Putin stated that the country was ready to stabilize the market through more natural gas exports, the energy market volatility calmed down. Stellaris (3.8%), Buzzi Unicem (3%), Exor (2.8%), Interpump Group (2.7%) and Enel (2.6%) performed best. FTSE 100 index rose 1.2% to 7,078 points, the highest point since September 30. It fell 1.2% in the previous trading day, led by weighted mining stocks and banking stocks. Investors welcomed the short-term solutions to the U.S. debt ceiling deadlock, falling energy costs, and falling government bond yields. In terms of data, the UK's Halifax house price index rose 1.7% month-on-month in September, the largest monthly increase since February 2007, with an average house price reaching a record 267,500 pounds. On the company side, online auto retailer Pendragon, office space provider Workspace, and British recruitment company Robert Walters all rose after optimistic quarterly reports. The Nikkei 225 index rose 149 points, or 0.54%, to close at 27678 points on Thursday, lowering the sharp gains in the early trading. It was previously reported that the Bank of Japan lowered the assessment of five of its nine regions for reasons. The tight supply and the surge in cases of new coronary pneumonia in the summer hit the economy. At the same time, the new Minister of Finance of Japan said that he would continue to implement monetary and fiscal stimulus measures while calling on the central bank to ensure market stability and corporate financing. Globally, Washington and Beijing agreed in principle to hold a virtual meeting between the presidents of the two countries before the end of the year. Local data show that Japan's leading economic indicators index and consistency index fell to the lowest level in 6 months in August. Market participants are now paying attention to the September non-agricultural employment data released on Friday. Tokyo Electronics rose 1.62%, while Z Holdings rose 0.57%. ASX 200 index rose by 50 points, or 0.7%, to close at 7257 points. In the latter part of the Wall Street recovery, with the progress of the US debt ceiling resolution, this is the first rise in three trading days. Traders also welcomed reports that Washington and Beijing agreed to hold a virtual meeting before the end of the year. In terms of economic data, the ADP report shows that US companies have added the most jobs in three months, and Friday’s employment data is expected to show that the labor market is still recovering strongly. Regarding the new crown virus-19, it is reported that Sydney’s restrictions will be further relaxed starting from Monday, as the city appears to withdraw from the lockdown for nearly four months after reaching the 70% vaccination rate target. Domestic technology stocks rose 2.3%, while pay-as-you-go shares rose 3.1%. On Wednesday, financial stocks rose 1% to make up for the losses, and three of the "big four" banks-NAB Ltd., ANZ Banking Group, and Westpac rose 1% to 1.6%. The Standard & Poor's/NZX 50 index fell 62 points, or 0.47%, on Thursday to close at a three-week low of 13105 points, falling for the third consecutive trading day due to persistent concerns about rising inflation. The Central Bank of New Zealand raised interest rates for the first time in seven years on Wednesday and signaled further tightening in an attempt to cool the domestic economy and soaring housing prices. On the corporate side, it is reported that due to Auckland’s strict restrictions on COVID-19 and doubts about whether Australia will reopen the tourism bubble, Air New Zealand’s operations are less than one-third of its usual domestic production capacity. Market participants are waiting for the US non-agricultural employment data to be released on Friday, which is expected to show that the US economy will add 500,000 jobs in September. Chatham Phosphate Co., Ltd., and Cook Global Food Co., Ltd. fell 5.79% and 5.71%, respectively. On Thursday, the Hang Seng Index rose 532 points, or 2.22%, to 24,498 in early trading. The trading day was volatile on Wednesday. There were reports that Washington and Beijing agreed in principle to hold a virtual meeting between the two presidents before the end of the year. Early speculation is that the two leaders may meet at the G20 summit in Italy in October. There is news that the US stock market rebounded from the early decline and closed higher. The market is optimistic that the government shutdown may be avoided, encouraging traders to enter new positions. Local data show that the private sector growth in Hong Kong in September was the lowest in three months, but this was the eighth consecutive month of growth due to the stability of the new crown pneumonia epidemic. At the same time, China Estates Holdings, the troubled developer China Evrgrande, planned to sell all of its shares to the funded developer and proposed that Solar Bright Ltd be sold for 1.91 billion yuan. The price of the Hong Kong dollar privatized it.

 

• REVIEWING ECONOMIC DATA:

Looking at the last economic data:

- US: US consumer credit increased by US$14.38 billion in August 2021, after rising by US$17.2 billion in the previous month, which was lower than market expectations of a US$17.5 billion increase. Revolving credit increased by US$2.98 billion, and non-revolving credit increased by US$11.19 billion.

- US: In the week ending October 2, the number of new applications for unemployment benefits in the United States fell from the previous seven-week high of 364,000 to 326,000, lower than market expectations of 348,000. As the job market continues to show signs of recovery and the impact associated with the summer peaks of Hurricane Ida and Delta Variations begins to weaken, the number of applicants is approaching the pandemic low of 311,000 reached in early September. In addition, once on non-seasonal adjustments, California (a decrease of 10,500 people), the District of Columbia (a reduction of 40,000 people), Michigan (a reduction of 3,200 people), and Texas (a reduction of 31,000 people) saw significant declines in claim levels.

- US: US employers announced 17,895 layoffs in September 2021, slightly higher than the 15,723 in August and the lowest since June 1997. Nevertheless, the total in September was still 85% lower than the same period last year. As in August, companies in the healthcare/products sector (2673 companies) are cutting expenses. Considering the third quarter, employers announced 52,560 layoffs, which is the lowest quarterly total since the second quarter of 1997. So far this year, employers have announced plans to cut 265,221 jobs from their payroll, a decrease of 87% from last year and the lowest total for the first nine months on record.

- CA: The Canadian Ivey Purchasing Managers Index rose from 66 last month to 70.4 in September 2021. Since June, this is the highest reading, supported by price increases (79.1 vs. 69.7 in August) and improved supplier deliveries (36.5 vs. 34.2). At the same time, the rate of job creation slowed further (63.7 vs. 66.9), and inventories also fell (57.7 vs. 60.3).

- EU: The minutes of the European Central Bank’s September monetary policy meeting show that the European Central Bank believes that it is appropriate to moderately reduce the rate of net asset purchases based on PEPP for the rest of this year, given favorable financing conditions and improved inflation prospects in the medium term. Despite this, policymakers have discussed more drastic cuts in asset purchases, and some even believe that the market has predicted that the stimulus plan will end by March 2022. At the September 2021 meeting, the European Central Bank also raised its growth and inflation forecasts for this year. The inflation rate in 2021 is 2.2% (estimated at 1.9% in June), 1.7% (1.5%) in 2022, and 1.5% (1.4%) in 2023. Regarding growth, the Eurozone economy is expected to grow by 5% (vs. 4.6%) in 2021, 4.6% (vs. 4.7%) in 2022, and 2.1% (vs. 2.1%) in 2023.

- EU: In August 2021, France's current account deficit was significantly reduced to 1.1 billion euros from the 3.4 billion euros revised downward last month. The goods deficit shrank to 5.4 billion euros from an upward revision of 6.5 billion euros in July, while the services surplus widened from 2.8 billion euros to 3.7 billion euros. At the same time, the primary income surplus slightly widened from 4 billion euros to 4.2 billion euros, and the secondary income gap remained unchanged at 3.7 billion euros.

- EU: In August 2021, France's trade deficit narrowed to 6.67 billion euros from 7.08 billion euros revised upwards last month. This is the most significant deficit since August 2020. Exports increased by 3.7%, driven by other industrial products (4.2%); transportation equipment (6.2%). Mechanical equipment, electronic equipment, computer equipment (1.8%), agricultural, forestry, and fishery products (15.0%). Geographically, sales to the EU have increased (3.9%); European countries outside the EU (3.5%); and Asia (14.1). At the same time, import growth slowed by 2.3%, mainly for other industrial products (1.7%); machinery and electronics and computer equipment (2.3%); and food (1.4%), while transportation equipment fell (-0.2%). Offset the growth. Among the major trading partners, upward pressure comes from the European Union (2.7%), the Americas (1.0%), and Africa (25.7%).

- UK: From April to June 2021, the UK labor productivity, measured by hourly output, increased by 0.1% quarter-on-quarter, compared to a preliminary estimate of a decrease of 0.5%, after a revised increase of 0.6% in the previous three months. The textile, clothing, and leather industries experienced the most significant increase in productivity (10.1%), followed by machinery and equipment (9.5%) and rubber, plastics, and non-metallic minerals (3.5%). However, the productivity of chemicals, pharmaceuticals (down 12.3%), and transportation equipment (down 8.7%) dropped significantly. The output per worker increased by 5.2% month-on-month.

- CN: China’s foreign exchange reserves fell from US$3.232 trillion in August to US$3.201 trillion in September 2021, slightly lower than the market’s forecast of US$3.225 trillion. At the same time, the value of gold reserves fell from US$111.69 billion to US$109.18 billion.

- JP: Japan's index of leading economic indicators shows that in August 2021, the index fell to 101.8 from the final 104.1 of the previous month. The index measures economic conditions in the coming months and is compiled using data such as employment opportunities and consumer confidence. This is the lowest level since February because the government is trying to control the increase in cases of the delta strain despite the low vaccination rate.

- JP: Preliminary data shows that Japan's economic indicator index over the same period, composed of a series of data such as factory output, employment, and retail sales, fell from 94.4 the last month ago to 91.5 in August 2021. Since February, this was the weakest data when the continued interference caused by the coronavirus forced the government to extend and expand the state of emergency across the country.

- AU: The Australian Industry Group’s Australian Service Performance Index rose slightly by 0.1 points from 45.6 in August to 45.7 in September 2021. The latest data show that the service industry has contracted for the second consecutive month.

- 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%.

 

• LOOKING AHEAD:

Today, investors will receive:

- USD: Average Hourly Earnings m/m, Non-Farm Employment Change, Unemployment Rate, and Final Wholesale Inventories m/m.

- CAD: Employment Change and Unemployment Rate.

- GBP: FPC Meeting Minutes, FPC Statement, and BOE Quarterly Bulletin.

- CNY: M2 Money Supply y/y, New Loans, and Caixin Services PMI.

- JPY: Average Cash Earnings y/y, Household Spending y/y, Economy Watchers Sentiment, and Current Account.

- AUD: RBA Financial Stability Review.

- EUR: German Trade Balance.

 

• KEY EQUITY & BOND MARKET DRIVERS:

- The French stock market rose 107 points. Faurecia (6.44%), Valeo (5.89%), and Saint-Gobain College (4.23%) contributed to this increase.

- The Japanese stock market rose 141 points. Kawasaki Kishimori (4.94%), Yahoo Japan (3.57%), and Hino Motors (3.51%) led the gains. Conversely, the biggest decliners were Inpex (down 7.38%), Idemitsu Kosan Co., Ltd. (down 5.74%), and Sumitomo Osaka Cement (down 4.93%).

- The yield on the benchmark U.S. 10-year Treasury note fell back to 1.51% on Thursday and hit 1.56% at the beginning of this week, 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 more and more likely that the Fed will gradually decrease 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.

- General Motors (GM) shares rose 3.5% as the company set a goal to double its revenue by 2030 from $ 140 billion to $ 280. GM sees the leading way to achieve this in developing new products such as the unmanned Cruise, the electric delivery van, and software. - According to the company's forecasts, revenue from software and data processing alone could reach $ 20- $ 25 billion. This is an entirely new approach for traditional automakers, in which there is a clear desire to repeat Tesla's business model and thereby increase margins.

- Twitter (TWTR) shares up 3% as the company struck a deal with AppLovin to sell its MoPub division.
- Nikola (NKLA) shares rose 5% after announcing a partnership with TC Energy to build and operate hydrogen hubs in the US and Canada.
- Aspen Technology (AZPN) shares up 7% after Bloomberg News reported that Emerson Electric is in talks with the company about a possible merger.
- BioNTech SE (BNTX) shares gained 3%, while Pfizer (PFE) shares rose 2% as companies filed with US regulators to declare their vaccine suitable for children aged 5-11.
- Faro Technologies (FARO) shares rose in price by 8%: Needham raised its recommendation on the security from "hold" to "buy."
- Lamb Weston (LW) shares declined 7% after a weak quarterly sales report.
- Levi Strauss (LEVI) shares up 7% after solid quarterly reports and higher forecasts.
- Loop Industries (LOOP) shares up 10%: HC Wainwright upgrades its rating to Buy from Neutral.
- Marvell Technology (MRVL) shares rose 4% after Investor Day, where the company raised its long-term growth forecasts.
- Square (SQ) shares up 3%: Jefferies analysts said investors "must" own the stock.

 

• STOCK MARKET SECTORS:

- High: Materials, Financials, Consumer Discretionary.

- Low: Utilities.

 

• TOP CURRENCY & COMMODITIES MARKET DRIVERS:

- CAD: The Canadian dollar/U.S. dollar exchange rate hovered around 1.26, a level that has not been seen since September 6, supported by news that the United States, which bought about 75% of Canada’s exports, has avoided national defaults. The U.S. Senate Minority Leader Mitch McConnel proposed a short-term suspension of the U.S. debt ceiling, ending the deadlock leading to a government default. In terms of data, Canada’s August trade surplus rose to 1.94 billion Canadian dollars, higher than the market’s forecast of 4.3 billion Canadian dollars. Exports increased slightly by 0.8% to a record 54.4 billion Canadian dollars.

- OIL: Level $ 80 / bbl. On Brent looked like strong resistance at the beginning of the week. However, events are developing quite rapidly. On Thursday, quotes for North Sea grade futures were already testing the round mark for strength as support. It is very positive that the attempt to go below $ 80 found increased demand, which allowed to resume growth and returned quotes to $ 82 / bbl. The price decline was driven by fears of a price war on rumors that the United States could print out strategic oil reserves to stimulate price reductions after OPEC did not decide to backtrack early this week and will continue to increase production by 400 thousand per month. Barrels per day. However, the US Department of Energy later said it did not use the strategic reserve to help contain gasoline prices. The bullish sentiment in the market was further supported by a report by Moody's Investors Service. Exploring companies need to increase their budgets by 54% to more than half a trillion dollars to prevent significant supply shortages in the next few years. Brent, $ / bar. - 81.86 (+ 0.96%), WTI, $ / bar. - 78.11 (+ 0.90%), Urals, $ / bar. - 80.27 (+ 1.06%).

 

• CHART OF THE DAY:

The U.S. dollar index remained almost unchanged at 94.2, still close to its highest point in a year. The market expects the Fed to gradually reduce its stimulus measures from November and start raising interest rates next year. At the same time, the ADP report shows that companies have added the most jobs in three months, and Friday’s employment data is expected to show that the labor market is still recovering strongly. In addition, the U.S. Senate seems to be close to reaching an interim agreement to avoid a federal debt default in the next two weeks on the political front. The Democrats said before that they might accept the Republican proposal to resolve the partisan deadlock threatening the overall economy.• U.S. Dollar index (DXY) - D1, Resistance (target zone) around ~ 94.38 & 95.99, Support (consolidation) around ~ 93.77 & 93.39.

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