Oct 21, 2022
VOT Research Desk
Market Insights, Considerations & Analytics
After three major US benchmark indices closed in the red for the second consecutive day as market participants digested the majority of corporate earnings results, long-term bond yields shot up to fresh 14-year highs following comments from a U.S. Federal Reserve official, December S&P 500 futures (ESZ22) are trending down -0.65% this morning. Losses in the Consumer Goods, Utilities, and Industrials sectors accounted for the majority of the weighting in three major stock indexes in the United States.
IBM and AT&T Inc.’s gains in the early part of the session helped all three U.S. stock indexes rise, but after President Patrick Harker of the Federal Reserve Bank of Philadelphia raised concerns about the Fed’s aggressive monetary policy, the gains reversed.”Keep raising rates for a while amid disappointing lack of progress on curtailing inflation,” Harker stated. The remarks came as concerns about current wage growth were fueled by lower-than-anticipated weekly jobless claims, which indicated strength in the labor market.
The move is typical given the wild U-turns that have occurred thus far in October. Harper’s comments provided further confirmation that the Fed is all in on continued aggressive policy and future (interest rate) increases.
In the meantime, U.S. rate futures have priced in a 96.5 percent probability of a 75 basis point rate increase and a 3.5 percent probability of a super-sized 100 basis point increase at the monetary policy meeting in November.
Today, data on Canada Core Retail Sales in a few hours is the topic of all attention. In comparison to the previous value of -3.1% m/m, economists anticipate that August Core Retail Sales will rise by 0.4% m/m on average.
Today’s report will include the New Housing Price Index for Canada. This figure is expected to be +0.2% m/m, up from +0.1% m/m in August, according to economists.
Additionally, investors are likely to focus on a Williams speech from the FOMC.
Data on the U.S. Federal Budget Balance will also be available today. In comparison to the previous value of -220.0 billion, economists anticipate this figure to be -173.5 billion. Ten-year U.S. Treasury rates are currently at 4.274%, an increase of +1.13%.
The Euro Stoxx 50 futures are down -1.52% this morning as political unrest in the UK continues and rising bond yields raise economic downturn expectations. Wall Street and Asia have been negative to European stocks after major indices closed lower as concerns about a recession weighed on sentiment. As political unrest in the United Kingdom continued on Friday with the resignation of Prime Minister Liz Truss following six weeks of policy shocks, European bond yields increased as well.
Today, data on UK Core Retail Sales and Retail Sales were made available.
In contrast to expectations of -0.5% m/m and -5.0% y/y, September retail sales in the United Kingdom were -1.4% m/m and -6.9% y/y.
In September, U.K. Core Retail Sales fell below expectations of -0.3% m/m and -4.1% y/y, reaching -1.5% m/m and -6.2% y/y, respectively.
As hawkish statements from Federal Reserve officials raised concerns about a recession, Asian stock markets ended the day with mixed results. The Nikkei 225 Stock Index (NIK) in Japan closed down -0.43%, while the Shanghai Composite Index (SHCOMP) in China closed up 0.13 percent.
The Shanghai Composite in China closed higher today as hopes for stimulus measures and positive signals regarding COVID restrictions limited weekly losses.The People’s Bank’s decision to raise interest rates and the government’s pledge to increase stimulus spending also contributed to the sentiment’s improvement.
The Japan Nikkei 225 Stock Index also fell today as a result of data showing that CPI reached an eight-year high in September.Losses in the Power, Non-Metal Minerals, and Precision Instruments sectors contributed to the index’s downward momentum.The implied volatility of Nikkei 225 options is taken into account by the Nikkei Volatility, which ended the day at 22.79, down 2.57%
In line with expectations, the Japanese National Core CPI was reported to have increased by 3.0% year over year in September.
After the company announced the results of a pre-planned interim group-level data analysis of its phase 1b clinical trial of IMU-935 in patients with moderate-to-severe psoriasis, Pre-Market U.S. Stock Movers Immunic Inc. (IMUX) saw a drop of more than 70% in pre-market trading.
In pre-market trading, Snap Inc. (SNAP) lost more than -25% following the company’s mixed Q3 results, which included revenues that fell short of estimates and a decision not to provide guidance for the fourth quarter.
Following Snap’s results, Meta Platforms Inc. (META) and Pinterest Inc. (PINS) both lost more than -3% in pre-market trading.
In pre-market trading, SVB Financial Group (SIVB) saw a drop of more than -15 percent following the release of a lower outlook and mixed Q3 results.
After the company released an encouraging earnings report for the third quarter, CSX Corporation (CSX) saw a rise of more than +3% in pre-market trading.
