Oct 31, 2022
VOT Research Desk
Market Insights, Considerations & Analytics
After three major US benchmark indices rallied the previous week, the Dow posted its best week in decades, and investors continued to digest a variety of corporate earnings results, December S&P 500 futures (ESZ22) are trending down -0.55% this morning. Gains in the Technology, Telecoms, and Utilities sectors were the primary driver of three major stock indexes in the United States.
After announcing results for the fourth quarter that were higher than anticipated, Apple (AAPL) surged by more than 7%, boosting the overall tech industry. After Intel’s (INTC) third-quarter results exceeded Wall Street expectations and the company announced plans to reduce costs in the coming years, the stock gained more than +10%.
The Fed’s preferred inflation measure, the core personal consumption expenditures price index, increased by 5.1% year-over-year in September, which was lower than analysts’ expectations of 5.2%, encouraging additional bets on less aggressive Federal Reserve monetary policy action. However, consumer spending remained robust, supported by falling gas prices and expanding faster than anticipated in September.
Investors will be watching the policy statement and decision regarding interest rates this week. In the meantime, U.S. rate futures have priced in a 19.0% chance of a rate increase of 50 basis points and an 81.0% chance of a rate increase of 75 basis points at the monetary policy meeting in November.
In a note, Morgan Stanley stated, “We expect the FOMC to deliver a fourth 75bp rate hike at its November meeting and indicate that it may soon be appropriate to step down the pace of hikes.
Market participants will also be keeping a close eye on Manufacturing and Services PMIs, JOLTs Job Openings, and ADP Nonfarm Employment Change data throughout the week.
Today, the U.S. Chicago Purchasing Managers Index (PMI) data in a few hours is the focus of all attention. The October Chicago PMI is expected to rise to 47.0 from 45.7, according to economists on average
.
Rates on 10-year bonds in the United States are currently 4.067%, an increase of +1.41%.
This morning, the Euro Stoxx 50 futures are up +0.08%.However, these gains are likely to be fragile given that sentiment has been impacted by negative factory activity data from China and the recent disruptions caused by COVID-related lockdowns. In addition, preliminary Eurozone CPI data for October came in at +10.7% y/y, exceeding expectations of +10.2% y/y. Last week, the European Central Bank increased interest rates by 75 basis points, anticipating a “further” increase to combat extremely high inflation.
Klaas Knot, a member of the ECB’s governing council, stated on Sunday, We will take a significant interest step again in December.
Today also saw the release of data on the Core CPI, GDP, Germany Retail Sales, and Switzerland Retail Sales of the Eurozone.
The preliminary Eurozone Core CPI figure of +5.0% y/y beat expectations of +4.8% y/y.
GDP (preliminary) for the Eurozone in the third quarter was 0.2% higher than anticipated, falling short of expectations of 1.0%.
Retail Sales in Germany in September increased by +0.9% m/m, exceeding expectations of -0.3% m/m.
Retail Sales in Switzerland in September increased by 3.2% year-over-year, below analysts’ expectations of 3.5%.
Today’s trading on Asian stock markets was mixed. The Nikkei 225 Stock Index (NIK) in Japan closed up 1.78 percent, while the Shanghai Composite Index (SHCOMP) in China closed down 0.77 percent.
After PMI data revealed that the manufacturing sector in China contracted in September, sentiment toward China worsened, and today, the Shanghai Composite closed lower. The reading demonstrated that disruptions caused by COVID are likely to persist in the world’s second-largest economy.
Despite data showing that industrial production fell even more in September, the Nikkei 225 Stock Index in Japan closed higher today. However, retail sales increased in September by more than anticipated, indicating some strength in the Japanese economy. The implied volatility of Nikkei 225 options is taken into account when calculating the Nikkei Volatility, which ended the day at 23.70, up 2.02%.
