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Breakfast Bites - Tue Oct 03, 2023

Rise and shine everyone.

The US Dollar index crossed 107 this morning with yields climbing as well. The Yield Curve has steepened significantly now to -0.394%. US Equity Futures are trading lower in response. Oil has pulled back down to $88/bbl. Gold is down crossing below $1830. Bitcoin is flat.

The major data release in the US is the JOLTS numbers. Last month, we saw a significant decline in the Job Openings down to 8.8 million from 9.1 million. This decline is crucial to bringing the labor market back into balance. We need to see levels between 7 and 8 million to achieve a more balanced target.

The other important number to focus on will be the quits - which is a number that tracks how much people are willing or able to leave jobs. If fewer people are quitting, it could be a sign that people need the money and feel there is no other alternative.

Asia - Pacific

  • Asian equities sharply lower Tuesday. MSCI Asia Pacific ex-Japan fell to lowest level in almost a year.A sharp selloff in Hang Seng selling off with sharp declines in property developers (though Evergrande up 28%). India and Taiwan are also lower. South Korea is closed.

  • Reserve Bank of Australia left cash rate unchanged at 4.10%, as expected. Statement was uneventful with Governor Bullock opting for make few changes. This was Governor Bullock’s first meeting so it should come as no surprise that while the messaging was hawkish, rates were held steady. We still think the next meeting in November may be “live” and depending on CPI data, we may see additional hikes.

  • RBNZ expected to leave official cash rate (OCR) unchanged at 5.50% at 4-Oct policy meeting. Inflation still remains a concern at 6% YoY although it declined from 6.7%. But, the macro also remains a concern and the New Zealand has hiked more aggressively than its neighbor Australia and most developed countries countries. Markets currently pricing in a ~50% chance of November rate hike and 100% probability of further tightening by Apr-2024.

  • Japan had its 10Y Japanese Government Bond (JGB) auction. It was a strong auction with the average yield at 0.768%.

  • South Korea's Hana Micron to invest $1bn in Vietnam chip production. It would seem that it’s not just the US that is concerned with the concentration of chip production in Taiwan. This could mean a major boost for Vietnam but, we’re going to have to wait and see how it plays out. We get industrial production and retail sales number for S. Korea later today.

Europe, Middle East, Africa

  • European equity markets mostly lower. Yield curve in Europe also continues to steepen so, banks are leading while luxury retail stocks are lower.

  • The latest update from the British Retail Consortium (BRC) showed shop price inflation at the lowest in a year in September. Prices rose at an annual rate of 6.2%, down from 6.9% in August, the lowest level since September 2022.

The Americas

  • ISM Manufacturing PMI was released yesterday for the US. While the overall PMI still remains in contractionary territory at 49, it improved from the previous month’s 47.6. Employment improve from 48.5 to 51.2, which is now expansionary. New orders also saw an improvement and prices declined. Raw materials prices decreased in September for the fifth consecutive month

  • Canada’s Manufacturing PMI came in at 47.5 vs 48 in the previous month.

  • Mexico’s Manufacturing PMI slipped into contractionary territory to 49.8 from 51.2.

"The pace of CTA unwinds in ES1 futures (magnitude + speed) have been the largest on record... by GS strat calculation, almost $40bn of spx was sold over the last 5 sessions"


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


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