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It is a new quarter and investors went on a shopping spree – stocks rallied by more than 3% – investors expecting a FED pivot. Oil rallied by 5% as the OPEC decision looms. Treasury yields fall as some are betting that the FED will pivot! US futures are up again today as the FED pivot story continues – are you seeing a pattern yet?  Try the Baby Pumpkins Stuffed with Pumpkin/butternut Squash Risotto. BOOM!  It is the start of the 4th quarter 2022 and what a start it was….buyers taking control of the market – either that or sellers finally became exhausted – taking the pressure off…..Economic data yesterday morning showed some weakness….the ISM Manufacturing PMI fell to 50.9…just a hair above neutral and below what was expected….while the S&P Manufacturing PMI rose to 52 – slightly higher than the expectation….construction spending falling by -0.7%, new orders fell to 47.1 and total vehicle sales strong, but less than expected….the RBA (Reserve Bank of Australia) was supposed to raise rates by 0.5% and they chose to surprise the markets and raise by only 0.25%……which was interpreted as a ‘slight pivot’….because the expectation was for a 0.5% rate hike…. It was… Read More »Four Qtr rally, investors bet on a pivot

The Reserve Bank of New Zealand is seen raising OCR by 50 bps to 3.5% in October. The focus will be on RBNZ’s policy guidance after the dramatic NZD fall has fed into inflation. A surprise 75 bps rate hike now seems off the table after the RBA hiked by only 25 bps. The Reserve Bank of New Zealand (RBNZ) is set to extend its rate hike trajectory into the fifth straight meeting on Wednesday. New Zealand’s inflation at a three-decade high combined with the dramatic fall in the kiwi dollar makes a compelling case for more central bank tightening. Is a 75 bps hike on the table? The RBNZ is widely expected to increase the Official Cash Rate (OCR) by another 50 bps from 3.0% to 3.5% when the board members meet on October 5. Such a hike would mean the central bank hiked policy rates by 50 bps for the fifth meeting in a row. This policy announcement will not be followed by a press conference with Governor Adrian Orr. Economists predict the central bank will deliver a half percentage point rate hike at this meeting as well as the meeting in November. A majority of them expect… Read More »Reserve Bank of New Zealand Preview: Sticking to its 50 bps rate hike pattern

Wild swings in sterling create a risk of contagion. Apple suffers a massive meltdown, and Tesla misses deliveries. Credit Suisse in turmoil as bank moves to reassure investors. It was an incredible week in financial markets, which is something we seem to be saying every week lately. This one truly was,however, due to the sudden risk of a mini-Lehman event in the UK spreading havoc across global markets. The big news was in the UK where sterling reacted negatively to the UK borrowing a bucket load of money to basically cut taxes for the top 10%. By eliminating bankers' bonus restrictions and also eliminating the top rate of tax, the new UK Prime Minister and Chancellor set out on a very shaky path. Sterling markets reacted with fury over plans to increase borrowing, sending sterling and UK gilts into free fall. The Bank of England then intervened in gilt markets to try and stem the damage. Later we learned the reason was a near meltdown in the pension industy, which would have led to a mini-Lehman moment. This sent risk assets into a tailspin and put the dollar once again on the charge. Sterling fell to a record low versus the dollar before… Read More »Week Ahead on Wall Street: Poor sentiment leads to new lows, but is October set up for a bear market rally?

UK manages to avoid negative Q2 growth “The FTSE 100 is lagging on a day that has once again shone the limelight on the UK a week on from the chancellors highly contentious mini-budget. Soaring mortgage offers have grabbed the headlines, with lenders reacting to recent market turmoil by hiking their borrowing rates in anticipation of greater instability and a reactive Bank of England. Nonetheless, we have seen homebuilders enjoy a relatively upbeat session, with the OBR now expected to provide their initial budget forecasts on 7 October. The Truss/Kwarteng double act will be back in the limelight this coming weekend as the Conservative Party Conference kicks off on Sunday, but there are precious few signals that the controversial tax hike for top earners will be withdrawn. From a market perspective, the pound has managed to recoup the entirety of the budget sell-off against the euro and dollar, but the gilt markets tell us another story. Fortunately, the surprise 0.2% GDP reading for Q2 helped alleviate fears that the UK was in recession as claimed by the Bank of England, but pressures are sure to ramp up as we move towards a difficult second half of the year.” Eurozone inflation… Read More »FTSE 100 lags despite surprise UK GDP boost

AUD/USD slides over flight to safety The Australian dollar slips as commodities fall amid recession fears. The latest CPI showed annual inflation easing slightly in August, which may convince policymakers that they are on the right track. However, another 50bp interest rate hike by the RBA this week could be sidelined by the market’s pessimism. Nervous traders may continue to hoard the safe-haven dollar amid selling of risk assets. Prolonged weakness in the Chinese yuan, as Australia’s biggest trading partner undergoes an economic slowdown could weigh on commodity prices and the Aussie proxy. 0.6260 is the next support and 0.6660 the first resistance ahead. NZD/USD falls over risk aversion The New Zealand dollar weakens as the risk-off mode prevails. The RBNZ is set to deliver its eighth straight rate hike with another 50bps. Governor Adrian Orr said the tightening cycle is ‘well advanced’ but not over yet. Low unemployment rate and high inflation would still give the central bank leeway to push for tighter conditions. The market expects a further 50bp rate raise in November, taking the official cash rate to 4%. Though pronounced weakness in the kiwi may exacerbate inflation, which may turn into a downbeat spiral. The pair… Read More »Temporary relief: Selling in risk assets is yet to end

Stock markets are bouncing back on Friday, although I don't think anyone is getting excited by the moves which pale in comparison to the losses that preceded them. This looks like nothing more than a dead cat bounce after a steep decline over the last couple of weeks as investors have been forced to once again accept that interest rates are going to rise further and faster than hoped. Double-digit eurozone inflation Inflation in the eurozone hit 10% in September ahead of schedule, with markets expecting a jump to 9.7% from 9.1% in August. In normal circumstances that may have triggered a reaction but these are anything but normal. Markets are still pricing in a more than 70% chance of a 75 basis point rate hike from the ECB next month with an outside chance of 1%. The euro is slightly lower following the release which also showed core inflation rising a little higher than expected to 4.8%. Sterling recovers as the UK is revised out of a potential recession We're seeing the third day of gains for the pound which has now recovered the bulk of the losses sustained after the “mini-budget” a week ago. This is not a… Read More »A busy end to the week

Turkish inflation is expected to increase to 83.5% in September due to significant price hikes in electricity and natural gas fees. In Hungary, we see the manufacturing PMI jumping to 58.2, as order books remain filled and supply chain issues have gradually recovered. Turkey: Annual inflation to increase further In September, we expect annual inflation to increase to 83.5% (3.1% on monthly basis) from 80.2% a month ago, given significant administrative price hikes in electricity and natural gas fees. Pricing pressures will likely remain broad-based on the back of a largely supportive policy framework along with a less supportive global backdrop leading to currency weakness. Hungary: Retail Sales to slow, industrial production to jump The calendar for Hungary contains some activity data from August. We see retail sales slowing as prices rise quickly and households are increasingly conscious about their spending. On the other hand, industrial production will jump as the month of August this year contained two more working days than in the last year, boosting the unadjusted growth figure. When it comes to the September outlook for industry, the manufacturing PMI will give us some clues and we expect this to suggest expansion as orders books remain filled and supply chain issues have become… Read More »Key events in EMEA next week

EUR/USD – 0.9704 Despite resumption of downtrend to a fresh 20-year trough of 0.9537 (Europe) yesterday, subsequent rally due to selloff in usd in tandem with US yields to 0.9750 in New York signals a temporary low is made, intra-day retreat may head to 0.9640/50, below, 0.9600. On the upside, only a daily close above 0.9750 would risk stronger retracement towards 0.9775 but 0.9810/13 should cap upside. Data to be released on Thursday Italy producer prices, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence, Germany CPI. U.S. GDP, PCE prices, initial jobless claims, continuing jobless claims, Canada GDP and average weekly earnings.  

Clifford Bennett from ACY Securities joined ausbiz TV to discuss the current state of currencies and what the forecasts are telling us. Clifford states that ‘it has been very easy to this point but we need to get back on our toes’ as we approach volatile levels in currencies. Individual central banks, governments, and some form of joint statement suggesting currencies need to stabilise is approaching. If you missed Clifford’s forecasts last year they were EUR .97, AUD 65, GBP 1.05, and this year highlighting .88, .58, 1.00 and .95 respectively. On to the US economy, it’s looking like a clear direction towards a recession with massive evidence indicating it may be an inescapable depression. Clifford links this to the governments and central banks not recognising the problems in the economy and therefore not taking any action to avert it. Clifford’s call is that there will be quite a significant economic catastrophe in the US and Europe. Domestically, we are not immune from this either and a recession is likely in Australia and Clifford remains bearish on equities. Listen here for all the details with Clifford.

EUR/USD – 0.9598 Euro's weakness to 0.9570 in New York yesterday following a rebound from Monday's fresh 2-decade low of 0.9559 to 0.9701 suggests re-test of 0.9559 would be seen after range trading, break extends downtrend to 0.9520 but loss of momentum may limit weakness to 0.9485. On the upside, only a daily close above 0.9652 would prolong choppy sideways swings and risk 0.9670, break, 0.9701. Data to be released on Wednesday: U.K. BRC shop price index, Australia retail sales, Japan coincident index, leading index, Germany Gfk consumer confidence, France consumer confidence, Italy business confidence, consumer confidence, industrial sales. U.S. MBA mortgage application, goods trade balance, wholesale inventories and pending home sales.