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Breakfast Bites - SPX headed for 3rd monthly decline

Rise and shine everyone.

A lot of macro data this morning weighing on markets

  • The BoJ tweaked their YCC to remove the cap of 1% and instead opting to keep that as a reference rate to conducting bond purchases. Inflation projections were increased sending a message that they are closer to their goal of inflation taking hold which could signal the end of easing. Japanese equities got a boost led by banks, 10Y yield spiked to 0.95% and the Yen weakened as the USD/JPY crossed 150 once again.

  • China PMI data came in lower with Manufacturing PMIs slipping into contractionary territory.

  • Mixed data from Europe as GDP numbers come in negative QoQ at -0.1% while inflation numbers came in much lower than expected. YoY Headline inflation declined to 2.9% vs. 4.3% previous and Core Inflation decline to 4.2% vs. 4.5% previous.

  • US Treasury announced financing estimates that came in lower than expected. Refunding announcement at 8:30am ET today.

US Equity futures are trading higher this morning, continuing price action from yesterday. Bond yields declined, driven by treasury financing estimates and a decline in oil prices. The Yield Curve is now at -0.198%. Gold continues to hold above 2000, and Bitcoin above 34,400. The US Dollar Index also pulled back marginally hovering around 106.

If the S&P 500 closes below 4284 today, it will mark the third consecutive month of decline.

Asia and Australia

  • Asian equities traded mostly lower Tuesday. Losses greatest on Hang Seng, which fell on poor PMIs, mainland China benchmarks also under pressure. More steep losses for the Kospi as battery stocks sank while the Taiex was also down. Southeast Asia and India lower, Australia closed a few points higher and Japan reversed early losses to end higher post BOJ move.

  • China Official manufacturing PMI was 49.5 in October, below expectations of a steady reading of 50.2. Production growth slowed to a three-month low as new orders slid back into contraction while exports fell at a faster pace. Employment and finished goods inventories continued to decline.

  • Japan’s Industrial production fell 0.1% m/m in September, compared to consensus forecast of a 0.2% gain. Main drivers were autos, general/business purpose machinery and ceramics while electric/IT equipment fell. Retail sales edged down 0.1% m/m, also softer than expectations of a 0.2% gain, following prior month's 0.2% advance.

  • South Korea Industrial production rose 1.8% m/m in September, contrasting with expectations of a 0.9% decline, extending a 5.2% gain in the previous month. Manufacturing shipments rose more sharply, leading inventories lower for the first time in three months. We still remain cautious on S. Korean equities.

Europe, Middle East, Africa

  • European equity markets higher.

  • Details of the Euro Area GDP numbers showed 0.1% quarterly growth in France, 0.3% in Spain and 0.5% in Belgium, but that failed to offset a 0.1% quarterly slump in Germany, no growth in Italy, and contractions in Austria, Portugal, Ireland, Estonia and Lithuania.

  • Details of Euro Area Inflation showed encouraging developments in services inflation at 4.6% versus prior 4.7%. Energy, food and services prices still well above the ECB's 2% target. Weaker demand leading to increasing momentum in disinflation trend.

  • ~40% of EU companies having disclosed results. Q3 earnings growth (7%) y/y vs (13%) expected with energy the main drag and financials the main positive contributor.

  • In the UK, data from insolvency practitioners Begbies Traynor showed construction firms in critical financial distress jumped 46% from the second quarter. In addition, real estate businesses saw a 38% jump in distress.

  • Inflation in the UK continues to ease. Shop price inflation fell to lowest level in more than a year at 5.2% versus a year earlier, down from 6.2% in September. It is the fifth month of softer price growth and weakest since August 2022. Data from the British Retail Consortium and NielsenIQ showed grocery prices up 8.8% in the year to October, the sixth consecutive month of deceleration and down from September's 9.9% increase.

The Americas

  • US blue-chip companies unleashed a wave of bond sales on Monday and raised $22.5 billion as borrowers look to sell new debt in a week jam-packed with bond auctions, central bank meetings and fresh economic data.

  • New U.S. export controls may compel Nvidia to cancel ~$5B in next-year orders for its advanced chips to China, a move that could deprive Chinese tech companies of crucial AI resources.

  • Apple on Monday introduced new MacBook Pro and iMac computers and three new chips to power them, with the company saying it had redesigned its graphics processing units (GPU), a key part of the chip where Nvidia dominates the market.

  • World Bank warns oil could jump above $100 on small disruption to crude supplies

Chart of the Day - The Surge in Bond Yields have been driven largely by growth and inflation expectations.


(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)


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