Market Update – October 5 – Stocks Leap 3%, USD & Yields Sink

• USDIndex – Sank and descended into 110.00 as USD and Yields slipped (US 10yr @3.61%). JOLTS missed significantly (10.05m vs 11.24 last time), adding to hopes Fed may be on the cusp of moderating and possibly even ending rate hikes in coming months (the Fed Pivot). Stocks charged higher (NASDAQ+3.34%). The 5.7% start to Q4 2022 after two days is the best start to a new quarter since Q2 1938 (+8.7%). RBNZ confirmed expectations with a 50bp interest rate hike. NZD rallied. MUSK said TWTR (+22.4%) deal was back on at original $54.20 per share.
• EUR – A weak USD saw EUR storm through 0.9900 and rally to Parity at 1.0000. Trades at 0.9967 now.
• JPY – Reversed from 145.00 to as low as 143.60 trades at 144.00 now.
• GBP – Sterling continued to rally, despite more public disagreements within Government. Cable stalled short of 1.1500 at 1.1490. Cable now trades at 1.1460.
• Stocks – US stocks, leapt again, over 3%. US500 +112.50 (+3.06%) 3790. All sectors rallied significantly. Asian markets ahead, European futures flat ahead of open.   

• USOil rallied again to $86.60 (9% in 2-days) ahead of OPEC+ meetings today with production cuts now  “up to 2.0 million barrels per day”.
• Gold – spiked higher again holding the key $1700 and trades at $1725 now. 
• BTC – rallied over the key $20k yesterday to $20.2k now.

Today – EZ, UK & US Final PMIs, US ISM Services, ADP, OPEC, Speeches from Fed’s Bostic & UK PM Truss.

Biggest FX Mover @ (06:30 GMT) NZDCHF (+0.81%) Rallied from Monday’s low at 0.5500 to 0.5696 yesterday, remains resistance today. MAs now aligning higher,  MACD histogram & signal line positive & rising, RSI 56.44 & rising, H1 ATR 0.00216, Daily ATR 0.84006.

 

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Could Job’s Slowdown Continue?

September payroll forecast is for a 210k increase after a 315k in August. The workweek is anticipated to hold steady from 34.5 in August, alongside a 0.1% hours-worked rise and a 0.3% gain for hourly earnings. The jobless rate should tick down to 3.6% after a rise to 3.7% in August from the cycle-low 3.5% in July. The impressive pace for job growth through July sharply outpaced GDP, which posted a -0.6% Q2 contraction rate after a -1.6% drop in Q1.

The risk is for payroll undershoots in each remaining month of 2022. Consumer confidence and producer sentiment continue to fall, alongside up-trends in initial claims and now continuing claims as well.

October kicked off with big gains in bonds and stocks and a pullback in USDIndex. The USDIndex was softer on the tempering in the FOMC outlook and closed at 111.00 handle. A dissappointing NFP report this Friday, could add pressure on the asset, with nearest support level at the 110.30 area.

Price is still in an uptrend and the probability is for bulls to resume buying at the lower end of the range if the reversal pattern yields an impulsive wave after breaking to the upside. Conversely, if price breaks below the 110.30 area impulsively and breaks the major uptrend too, sellers could take control of the market and drive price down towards the 109.09 area which represents the next higher-low structure.

Breakdown

The 210k nonfarm payroll forecast includes a 180k private jobs increase. The goods based employment increase is pegged at 45k, after gains of 45k in August and 66k in July. Construction employment is seen rising 20k after 16k in August, and 24k in July, while factory jobs rise 20k after a 22k August gain. The private service job should increase of 136k in September, after gains of 263k in August and 411k in July. A 30k climb in government employment could be seen, after a 7k rise in August and 49k in July.

Hourly Earnings

We expect a 0.3% September average hourly earnings rise, following gains of 0.3% in August, 0.5% in July and 0.4% in both June and May. We expect y/y wage growth to dip to 5.0% from 5.2% in the three months before, with a downtrend reflecting the continuing return of lower-paid workers to the labor pool. Prior to the pandemic, growth in hourly earnings was gradually climbing from the 2% trough area between 2010 and 2014 to the 3%+ area until the pandemic-induced spike.

The ECI data are designed to avoid distortion from the shift in the composition of jobs that has sharply impacted the payroll report’s wage measure through the pandemic. The ECI revealed a 1.3% Q2 rise, following a 1.4% pop in Q1 that marked a 38-year high previously seen in Q3 of 1989. The y/y ECI gauge rose to a 32-year high of 5.1% in Q2, eclipsing a prior high of 4.5% in Q1. For the components, we saw a 1.4% Q1 gain for wages and sales, which undershot the 1.5% increase in Q3 of 2021 that marked a 40-year high. Benefit costs rose 1.2% after a 1.8% gain in Q1 that left an 18-year high. For the y/y component gains, we saw a 5.3% gain for wages and salaries that marked a 39-year high. We saw a 4.8% Q2 y/y benefit cost gain that marked a 17-year high.

Continuing and Initial Claims

Continuing claims fell by -90k between the August and September BLS survey weeks, following gains of 47k in August and 41k in July that marked the only two increases since May of 2020. We expect an initial claims average of 207k in September, following 237k in August, an 8-month high of 247k in July, and a cycle-low of 175k in March. We saw BLS survey week readings of 209k in September, 245k in August, and 261k in July, versus a cycle-low of 177k in March. The September tightening in claims trims the downside risk for our 210k September payroll estimate, though we’ve still seen a net rise in both initial and continuing claims in March and May, respectively.

The 4-week average for initial claims has a strong inverse relationship with the monthly payroll gain. Until the massive claims surge caused by COVID-19, claims had been surprisingly tight relative to the rate of job growth, presumably due to reduced job churn in the later half of the last expansion. This relationship has taken a wild ride since COVID-19 due to big swings in job churn, and initial claims won’t be particularly useful for forecasting payrolls until we see how the series match up in the post-pandemic environment.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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GBPAUD: Tests FR61.8% from 2013-15 rally

Sterling tumbled following the early announcement of the new government’s mini-budget. There was speculation that the pound would fall below parity against the Dollar, like the Euro. However, the Pound found its footing against other major currencies as the Bank of England stepped in with an emergency intervention to buy long-term bonds and calmed market sentiment.

Yesterday (October 3), British Chancellor of the Exchequer, Kwarteng, said the government would cancel the 45% cut in the top income tax rate – further supporting the Pound. Under the conditions of the current environment, the large-scale tax cut plan without capital support may do more harm than good, and threats such as rising borrowing costs and deepening fiscal imbalances will damage the credit rating of the UK’s sovereign debt. Rating agency Moody’s is scheduled to reassess the UK government’s credit rating on October 21. Earlier, another rating agency, Standard & Poor, had downgraded the UK’s credit rating from “stable” to “negative”.

Today, the Reserve Bank of Australia announced a 25 basis point increase in interest rates in its interest rate decision to 2.6% (the highest since August 2013), lower than market expectations of 2.85%. This is the central bank’s sixth rate hike in six months. The committee said further rate hikes will continue to “achieve a more sustainable supply-demand balance” for some time to come, and the magnitude and timing of rate hikes will be determined by economic data. The Committee also expects inflation to remain stable over the medium term. In short, the heightened recession risk has prompted the central bank to turn cautious and slow the pace of rate hikes, possibly pausing as future demand weakens and inflation peaks.

Technical Analysis：

Last month, GBPAUD dipped below 1.6000 for the first time since March 2017 before stabilizing and recovering to settle at 1.7430 . After the RBA interest rate decision, the currency pair continued to test the 1.7500 mark, which is 61.8% of FR extending from the low in March 2013 to the high in August 2015, and it is also a key resistance in the near future. A successful breakout could open the door to further gains for the bulls, with next resistance at 1.7800, 1.8400 (FR 50.0%) and 1.9300 (FR 38.2%). On the other hand, the 100-day SMA is near-term dynamic support. A candle close below this SMA may signal a build-up of bearish power and the pair may push down to the minor support area of ​​1.6870-1.7030. A break below this area would extend sellers to the next support at 1.6100 and last month’s low of 1.5915.

Click here to access our Economic Calendar

Larince Zhang

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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3 emerging market dividend stocks to buy now

Professional investor Omar Negyal of the JPMorgan Global Emerging Markets Income Trust picks three of his favourite emerging market stocks to buy now

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Investment Bank Outlook 04-10-2022

BNY MellonRBNZ Might Run Out of RoomThe Reserve Bank of New Zealand is expected to hike its policy rate by another 50bp this week, but the market has long since given up on using the NZD as one of the proxies for advanced policy expectations generating currency performance. Be it liquidity preference or concerns over domestic performance, throughout the year we have noted with immense frustration that the market repeatedly failed to acknowledge the RBNZ’s revisions higher to its terminal rate. Even on a relative basis, such as vs. AUD, the NZD has consistently underperformed. This has been despite retaining general rate advantages, and arguably retaining a lower beta to global risk conditions, such as China’s growth woes and energy matters. NZD OIS still suggest that a 5% terminal is possible, but we think the RBNZ would struggle to match that. Even if it did, we doubt NZD would find much traction beyond a short-term bounce considering where pricing for the Federal Reserve stands.Much of the inflation impulse within New Zealand and associated supply issues were self-driven through fiscal and monetary support. The withdrawal process should mostly be reflected in domestic weakness as well, rather than imported pass-through. This means that as a policy objective, the RBNZ is unlikely to push for currency strength in the same way that other small, open economies, such as Switzerland and Sweden, have done. Even select policymakers in the Eurozone and UK have pushed for a stronger currency on an outright basis, but this has not had the anticipated policy impact because the Fed is so far ahead.The RBNZ should also have a broad idea on the distribution of the Q3 inflation print. While we expect ongoing strength in tradables, risks to the non-tradables seem clearly skewed to the downside. Although the level of declines is small, the RBNZ cannot escape the fact that domestic-based non-tradable inflation has fallen for three straight quarters; a fourth is likely. The RBNZ’s previous forays into FX intervention weren't the most favourable, so we expect the RBNZ to let the NZD run its course and focus its efforts on domestic demand.The trajectory of non-tradables inflation suggests that large upward revisions to the policy path and terminal rates at the Monetary Policy Statement (MPS) to follow in November are unlikely. However, we cannot rule out the RBNZ changing its view on tradables inflation and subsequently looking to pursue a more aggressive NZD view through rate hikes beyond the August MPS projections. The current outlook is for tradables inflation to fall to 5% by year-end and, crucially, import prices are expected to fall by 3% in 2023 and a further 1% in 2024 in NZD terms. For now, the distribution of inflation remains broadly in line with the RBNZ’s expectations. If there is no material downside drag in the rate path out to 2025 (4.0% average), NZD losses should be limited considering current positioning and valuations.

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Daily Market Outlook, October 4, 2022

Daily Market Outlook, October 4, 2022 Overnight Headlines UN Calls On Fed, Other Central Banks To Halt Interest-Rate Increases Fed's Barkin: Permanent Shifts In Inflation Could Mean More Volatile Policy Fed's Williams: Fed Is Cooling Inflation But Underlying Pressures Still Strong BoE's Mann: Concerned About Upward Drift In Inflation Expectations UK Chancellor To Bring Forward Debt-Cutting Plan After Tax U-Turn Some Of Truss’s Top Team Say Her UK Project May Already Be Over Climbdown On 45pc Tax Doesn’t Change ‘Negative’ Outlook For UK, Warns S&P US Seeks To Further Restrict Cutting-Edge Chip Exports To China Consumer Prices In Japan's Capital Rise At Fastest Pace Since 2014 RBA Surprises Market With Quarter-Point Hike, Currency Tumbles N.Korea Fires Missile Over Japan, Sparking Warning Messages Crypto Could Threaten Financial System, Federal Risk Panel Warns Biden Administration Urges Congress To Speed Up Crypto Rules Aussie Bond Yields Challenge Gilts For The Biggest Drop Oil Forges Higher As Traders Expect OPEC+ To Deliver Supply Cut OPEC+ Scraps Technical Meeting Ahead Of Key Meeting Of Ministers Australia Stocks Jump After Smaller Rate Hike; Asia Markets Rise Boeing Does Not Expect FAA Approval For Max 10 Before Summer 2023The Day Ahead Asian equity markets are mostly up sharply this morning. That follows a big rise in US stocks yesterday and somewhat smaller gains in Europe. Some reports have said that the moves were supported by weak US economic data boosting expectations that interest rates may not have much further to climb. The Australian central bank hiked interest rates by 25 basis points at its latest policy update below expectations for another 50bp increase. Meanwhile, media reports suggest that the UK government may bring forward the date for the release of its medium-term fiscal plan currently scheduled for 23rd November. There is no UK economic data of note today. The Conservative Party Conference continues but the next big event is PM Truss’s speech tomorrow. In the meantime, topics other than monetary policy may be discussed. In the Eurozone, producer price data for August will provide an update on pipeline inflationary pressures. The latest consumer price data for the single currency area showed a further rise in inflation as energy and food prices, and indeed prices more generally, continued to increase rapidly. Today’s update is expected to show that cost pressures remain intense. US factory orders are expected to have grown modestly in August. Already released data for durable goods orders showed a small fall due to a decline in the volatile transport sector. However, other orders rose and it is predicted that will also be the case for non-durable orders. European Central Bank President Lagarde is scheduled to speak at an event for students, and so seems unlikely to reveal anything new about the ECB’s plans for monetary policy. There are no scheduled speeches from Bank of England policymakers, but several US Federal Reserve officials are set to speak and markets will watch for clues on how much further interest rates will be raised at the upcoming November meeting. Early tomorrow, New Zealand’s central bank is expected to hike interest rates. Most forecasters are expecting a fifth successive 50bp rise taking the official cash rate to 3.5%. Looking further ahead, the consensus expectation amongst economists is that rates will peak at around 4.0-4.5% next year, while markets are priced for rates to reach 5% by May.FX Options Expiring 10am New York Cut EUR/USD: 0.9645-55 (2.1BLN), 0.9700 (609M), 0.9750 (676M) 0.9800-05 (679M), 0.9900 (388M) USD/JPY: 142.00 (445M), 143.00 (200M), 144.50 (417M) 144.70-75 (347M), 145.00 (567M) EUR/CHF: 0.9600 (210M) GBP/USD: 1.1300 (546M). EUR/GBP: 0.8800 (487M) 0.9000 (550M) USD/CAD: 1.3400 (480M), 1.3575-85 (395M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.00 Edges higher in risk – on Asian session EUR/USD opened +0.23% at 0.9823 after lower US yields weighed on USD In a buoyant Asian session, EUR/USD traded in a 0.9806/46 range Heading into the afternoon it is trading around 0.9840 Asia was in a buoyant mood with Nikkei up over 2% and E-minis +0.45% Support is at 0.9758 and break renews downward pressure Resistance is 1.00 a break would suggest bottom in place 20 Day VWAP bullish, 5 Day bullishGBPUSD Bias: Bearish below 1.1250 GBP/USD up to test BoE hike day top pre – UK fiscal plan date Cable breaks 1.1365 before Kwarteng reveals new date for his fiscal plan 1.1365 was Sept 22 high (just before BoE's 50 bps hike) UK fiscal plan expected later this month vs originally scheduled Nov 23 date New date news follows Monday's UK tax U-turn, which lifted GBP Gilt market resilient despite 'major repricing' - DMO head 1.15 next upside hurdle 20 Day VWAP is bullish, 5 Day bullishUSDJPY Bias: Bullish above 140 Bid, but softer UST yields, intervention fears cap +0.15% towards top of 144.41-144.91 range - choppy consolidation extends Consumer prices in Tokyo +2.8%y/y - fastest pace since 2014 A week of lower UST yields and intervention fears are capping USD/JPY BoJ intervention - pivotal 141.97 support Monday's 145.40 high first resistance then September pre intervention 145.90 This week's 144.16 low then 143.10 are initial supports Broad 143.00-146.00 range viable this week unless there is major news 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .6750 AUD/USD down 0.65% as RBA's less than expected 25 bps hike surprises traders Recovers quickly after falling to 0.6451 from day high of 0.6543 C.bank balancing risks to growth while fighting inflation taken as positive Cites deteriorating outlook for global economy as reason for smaller hike Response of AU households to sharply higher borrowing costs also a factor AUD rallies likely to be limited as Fed remains focused on inflation fight Break of 0.6540 strong resistance required to signal s/term low in place More resistance at 0.6570-75; support 0.6450, 0.6420-25, 0.6390-0.6400 20 Day VWAP is bearish, 5 Day bullishBTCUSD Bias: Bearish below 25.3K BTC testing offers towards 20k Crypto Could Threaten Financial System, Federal Risk Panel Warns Biden Administration Urges Congress To Speed Up Crypto Rules Fed: Even 'Safe' Stablecoins Might Pose Financial Stability Risk - CoinDesk UK Shuts Down Temporary Crypto Company Licensing Program - CoinDesk FTX's Head Of OTC And Institutional Sales Has Quietly Left The Firm First resistance sited at 21k support now see at 18k 20 Day VWAP is bullish, 5 Day bullish

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Market Update – October 4 – Stocks Bounce, Yields Fall, RBA Springs a Surprise

• USDIndex – Descends into 111.50, support area, and under 9-day EMA for first time since September 19. Yields slipped significantly (US 10yr @3.65%) following a reverse from UK Chancellor tax cut plan lifted UK GILTS and wider sentiment. ISM Manu. data hit a 2.5 year low but at 50.9 remains in expansion mode. Oil & Oil Stocks rallied on OPEC production cut rumours and TSLA dropped -8.6% on delivery misses and with no immediate solution. RBA surprised with a 25bp hike vs. an expected 50 bp interest rate hike. AUD & JPY underperform overnight.    
• EUR – Trades at 0.9840 now testing Friday high but capped by an 9-day high at 0.9900.
• JPY – Remains weighed, 145.00 was breached but only for an hour yesterday, despite hawkish comments from Japanese officials – trades at 144.80 now.
• GBP – UK government confirmed it will scrap plans to abolish the 45% top tax rate  in humiliating U-turn. Sterling continued to rally, Cable and GBPJPY breached 20-Day MA’s. Cable now trades at key resistance  1.1350. 
• Stocks US stocks, ripe for a bounce at the beginning of the Quarter, leapt over 2%. US500 +92.81 (+2.59%) 3678 Energy stocks led with XOM & CVX (+5%) and APPL & MSFT, (+3%),which led tech lower on Friday, led the rally on Monday. TSLA sank -8.6% pulling TWTR -3.10% & RIVAN -3% lower.  
• 
• USOil rallied over 6% to $84.35 highs after weekend reports of OPEC+ cutting production “up to 1.5 million barrels per day”. trades at $84.00 now.
• Gold – spiked higher from $1665 over the key $1700 and trades at $1703 now. 
• BTC – rallied from sub $19.0k yesterday to $19.7k now.

Today US Factory Orders and Speeches from Fed’s Williams, Logan, Daly, Mester & Jefferson, ECB’s Lagarde

Week Ahead – US Services,  RBA & RBNZ Rate decisions, ADP & CAD & US (NFP) Jobs.

Biggest FX Mover @ (06:30 GMT) EURJPY (+0.56%) Rallied from Thursday’s collapse to 140.00 to test 143.00 zone today. MAs now aligning higher,  MACD histogram & signal line positive & rising, RSI 67.44 & rising, H1 ATR 0.243, Daily ATR 1.706.

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Easing Selling Pressure in US Bonds Takes Off some Steam from Greenback Rally

This year's final quarterbegan on a pessimistic note, with the US stock market losing more than 1.5percent on Friday, cementing short-term risk aversion and bearish sentiment. Riskassets picked up the baton on Monday and extended the bearish trend. Europeanmarkets sank by more than half a percent, the S&P 500 futures struggle to defendthe foothold at 3600 points. The dollar, after pulling back from multi-yearhighs, moved into consolidation (111.70-112.50 on DXY), the key factor of theUSD parabolic rally – Treasury market sell-off, somewhat weakened itsinfluence, as bond yields after rebounding from key levels (4% on a 10-yearbond) remain range-bound:Oil prices climbed 4% afterrumors emerged that oil exporter group OPEC+ could announce a 1 million bpdoutput cut on Wednesday. On the one hand, the balance of supply and demandshould move into equilibrium with higher prices, which, in fact, the market isnow pricing in, on the other hand, there is a more subtle consequence of such astatement - a signal that the alliance may be worried about a slowdown, andperhaps even a decrease in global demand for oil, and therefore forced to announceoutput tweaks. Undoubtedly, in terms of medium-term expectations, thisstatement will likely have negative rather than positive implications for thedemand for risk as commodity market trends are tied to business cycle swings.In the short term, the OPEC+decision may lend a bullish impetus for CAD and NOK, which have fallen 5% and8% against the dollar since the beginning of September, but whether thesecurrencies will be able to hold gains remains in question, since they usuallyrise along with demand for risk assets in general:Investor confidence in thePound, and more specifically in Britain's sovereign debt, continues to recovergradually after the UK government was forced to make a U-turn on the mostcontroversial measure in the new fiscal stimulus package – tax cut for UK’stop-earners. Nevertheless, it is not clear whether it was enough to addressinvestors’ concerns, because, firstly, the Bank of England is trying to restoreconfidence in Gilts market, conducting bond purchases, which distorts pricingand deters sales, and secondly, the U-turn reduces the cost of the fiscalpackage by only 2 billion pounds. The final reaction will be clear after the CB’sinterventions are over, the announced deadline is October 20. In the shortterm, the risks for the pound sterling are likely to be skewed to the upside,given that since the beginning of September, sterling has fallen by 11% andthen recovered just 6.5%, the BoE continues to support the bond market, and thegovernment is willing to compromise and may be expected to deliver more tosoothe market concerns.

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Wheat Mini Futures ( XW1! ), H4 Potential for Type: Bullish Momentum

Type: Bullish MomentumKey Levels:Resistance: 20.005 Pivot: 19.140 Support: 18.720Preferred Case:The price is crossing the ichimoku cloud and moving within the ascending trendline, we have a bullish bias that the price may rise from the pivot at 19.140, which is in line with the 23.6% fibonacci retracement to the 1st resistance at 20.005, where the 78.6% fibonacci retracement and overlap resistance are.Alternative Scenario:If bearish momentum persists, expect price drop to the 1st support at 18.720, where the 50% fibonacci retracement is.Fundamentals:There is no major news.

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Investment Bank Outlook 03-10-2022

BNY MellonIs Anybody Paying Attention?With markets' attention focused on events in the UK, we wonder if global central banks' fight against inflation is being overlooked. Friday’s release of the US Personal Consumption Expenditure deflator for August showed that core inflation – recall that PCE inflation at 2% is the Federal Reserve's formal target – accelerated yet again, to 0.6% m/m and 4.9% y/y, both well above expectations. A day earlier, Germany's preliminary estimate for inflation (using the EU’s harmonized CPI) approached 11% in the 12 months through September. Despite some signs that supply chains are improving, we have not seen this translating into “convincing evidence” (the Fed’s current standard) that inflation is falling.Market volatility and the potential for financial disruption and contagion to spread have in turn led market pricing for terminal rates in the US (and elsewhere) to soften. In the US, for example, since the FOMC on Sept. 20-21, 6m and 9m OIS futures have given back around 25bp on terminal-rate expectations, with rate cuts starting soon thereafter. As a reminder, we have always quibbled with this sort of pricing.Last Thursday and Friday, Cleveland Fed President Mester and Fed Vice Chair Brainard respectively asserted that once rates get to their eventual destination, they will stay there “for a some time”; and that the Fed is “committed to avoiding pulling back prematurely”. As we wrote some time ago, the lessons learned from the early 1970s episode of high inflation suggest not only that rates need to reach positive levels in real (inflation-adjusted) terms, but also that reducing them too quickly risks a reprisal of inflationary pressures.Yet, we wonder if investors are listening to this messaging; if they are, it would seem they are not taking these statements of intent seriously. In the chart below, we use the ECFC function in Bloomberg to obtain consensus forecasts for both G10 policy rates and inflation for 2022 and 2023; this gives us an idea of what is expected for real rates. Clearly, with inflation so high currently and rates generally still likely having a way to rise, it’s not a surprise to see such deeply negative real rates forecasts through the remainder of this year.But for next year, we are uneasy with the consensus. We see that positive real policy rates are expected only in the US and New Zealand. Even for these two markets, the expected real rate inferred from our exercise are quite low, at just 0.2% in the US and 0.3% in New Zealand. This is far too low, in our eyes. And note: these estimated real rates are using inflation rates that are, on average across the 10 countries we examine, almost 2% lower in 2023 than they are forecast to be for this year.

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Daily Market Outlook, October 3, 2022

Daily Market Outlook, October 3, 2022 Overnight Headlines Tory Revolt Forces Liz Truss To Delay 45p Tax Rate Vote - Telegraph UK PM Truss Admits Mistake In Communicating Economic Plan Credit Suisse CEO Seeks To Calm As Default Swaps Near 2009 Level Kwarteng Trying To Head Off Tory Rebellion Over Tax Cut Debacle S&P Puts UK Credit Rating On Notice With ‘Negative Outlook’ Japan's Business Mood Worsens In Third Quarter, 'Tankan' Survey Shows BoJ Board Debated Risk Of Overshoot In Inflation, Sept Summary Shows Sliding Output, Orders Hit Japan's Factory Activity In September RBNZ Shadow Board Recommends Half-Point Rate Rise This Week Ukraine Take Key Town, Putin Ally Mulls Possible Nuclear Response Yen Weakens Past 145 Per Dollar, Nears Last Intervention Levels Oil Jumps As OPEC+ Mulls Biggest Production Cut Since Pandemic Eni Expects Halt In Russian Gas Flow To Italy To Extend Into Monday Stocks In Asia Struggle To Gain Traction, US Equity Futures Fluctuated Tesla Deliveries Back To Record, Though Dented By Distribution DelaysThe Day Ahead Outside of Japan, equities across Asia are mostly trading lower overnight as rising interest rates amid deteriorating global growth, continue to weigh on risk sentiment. In part, this also reflects reports that OPEC is considering slashing oil production, which has pushed up oil prices at the start of the week. UK Chancellor Kwasi Kwarteng has announced that plans to scrap the 45p rate of income tax would be abandoned. The measure, which was part of the fiscal statement that was made on 23 September and led to rout in sterling assets, had been subject to criticism from some Conservative Party MPs over the weekend. The focus will remain on domestic politics as the Conservative Party conference continues in Birmingham. Ahead of PM Truss’s closing speech on Wednesday, as she faces pressure to help shore up investor confidence and with latest polls pointing to a widening lead for Labour, the Chancellor is expected to speak later today at 16:00BST. While the government’s fiscal plan aimed at boosting long-term growth was lauded by business organisations, most analysts believe markets were concerned about the lack of an independent economic assessment from the Office for Budget Responsibility (OBR). The OBR has said it will provide a first ‘iteration’ of its forecasts to the Chancellor on Friday and will also set out a full timetable for the period to the full release on 23 November. However, this morning’s announcement markets will be listening closely for further evidence that the Chancellor is committed to fiscal discipline. This evening, Bank of England (BoE) rate-setter Catherine Mann is scheduled to speak on inflation at the C.D. Howe Institute on ‘The Path Back to 2 Percent’. Whether Ms Mann will focus on the UK’s current situation is unclear, however, any comments she makes about the domestic interest rate outlook, post the recent fiscal event, will be closely followed. Speaking last week, the BoE Chief Economist Huw Pill indicated that the government’s fiscal plan would lead to a “significant monetary policy response”, although he played down the likelihood of an interest rate hike before the next scheduled update on 3 November. Markets have reined in their expectations but, are still pricing in at least a 100bp increase (to 3.25%) by early November. Manufacturing PMI reports for September across the UK, Eurozone and US are final estimates and are expected to show that manufacturing activity largely remains in contractionary territory across most of Europe, while for the US, the PMI report will be overshadowed by today’s more-closely watched US ISM release. The headline manufacturing ISM report is expected to remain above 50, signalling expansion, albeit supply chain issues are expected to see a moderation in the index. US Federal Reserve policymakers members Bostic and Williams are scheduled to speak today. Overnight, the Reserve Bank of Australia is expected to be the latest central bank to increase interest rates, with a 50bp increase to 2.85% predicted by financial markets.CFTC Data Spec net long USD position grows on CAD, yen sales; EUR position steady USD net spec long grew in Sep 21-27 period, $IDX +3.66%... EUR specs +348 contracts now +33,797, note EUR$ 2 big-figs up from Tues $JPY +0.77% in period, specs -1,276 in period now -82,556 GBP$ -5.65% in period, specs +8,419 contracts now short 46,424 CAD specs flip to short, -19,722 contracts now short 17,666 AUD specs +5,903 contracts now short 34,653; AUD$ -3.79% Bottom-fishing as entrenched longs exit market & new USD shorts enter Note: USD has moved significantly lower since period close on Sep 27 Source - ReutersFX Options Expiring 10am New York Cut EUR/USD: 0.9600 (250M), 0.9645-50 (510M) 0.9675-80 (400M), 0.9740 (200M), 0.9760 (254M) USD/JPY: 142.50 (579M), 145.00 (405M) USD/CHF: 0.9880 (230M), 0.9900-05 (630M) EUR/CHF: 0.9650 (570M) AUD/USD: 0.6570 (306M), 0.6640 (358M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.00 EUR/USD flitters between gains and losses; EU PMI cued up EUR/USD fluctuates between mild losses and gains vs Fri Last at 0.9812, holding above 38.2% Fibo support 0.9777 That could keep it from downtrend channel at 0.9743 ECB President Lagarde attending Eurogroup meeting May reiterate hawkish tone on inflation EZ manufacturing PMI cued up, expected unchanged at 48.5 20 Day VWAP bearish, 5 Day bullishGBPUSD Bias: Bearish below 1.1250 Pops on UK Government U turn on Tax plan S&P cuts UK rating outlook S&P cuts outlook for UK AA credit rating from "negative" from "stable" Says PM Truss's tax cut plans would cause debt to keep rising Truss tries to reassure on economic plan, says it is right UK's Kwarteng favours outsider to run finance ministry Consolidating in a 1.1100-1.1200 range 20 Day VWAP is bearish, 5 Day bullishUSDJPY Bias: Bullish above 140 Elevated US yields support, Japan intervention fears cap USD/JPY to consolidate in 144.00-145.00 range in absence of fresh catalysts Supported by buoyant US yields, elevated US inflation pressure Two-year US Treasury-JGB yield spreads above 4%, underpin USD Fed united on inflation front; Brainard rejects early rate cuts Reports Japan spent record of nearly $20 bln on intervention will limit rise Intervention drains nearly 15% of readily available funds. 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .6750 Better bid on pre – RBA bargain hunting AUD/USD rallies 0.6% on light short-covering as focus turns to RBA Tuesday Central bank expected to hike 50 bps, but may surprise with 25 Higher-than-expected global inflation ups fears of jumbo c.bank rate hikes Risk aversion, falling commodities, recession fears cap AUD rallies ASX 200 flat; Sydney holiday Monday limits FX trading interest Asia range 0.64025-0.6451; support 0.6400-05,0.6360-65, resistance 0.6480-85 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 25.3K BTC rotates around 19.5k Binance celebrates 'Cryptotourism' with first-ever crypto-powered trips Indian crypto exchange WazirX lays off 40% of its employees – Coindesk Crypto lender Celsius not seeking payments for outstanding loans First resistance sited at 21k support now see at 18k 20 Day VWAP is bullish, 5 Day bullish

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Alibaba: Hovering Above 52-Week Low

The Alibaba Group, best known as China’s largest e-commerce company, was founded in 1999 by Jack Ma. It includes online platforms such as Taobao (C2C), Alibaba.com (B2B) and Tmall (B2C), providing all kinds of e-commerce services to cater for online shopping needs. The company has also expanded its businesses internationally through AliExpress and Lazada.

Fig.1: China E-commerce Value (CNY trillion). Source: GlobalData

In conjunction with China’s National Day (also known as Golden Week, from 1^st to 7^th October), investors may be interested to know if there will be a spending boom during this period especially in the midst of rigid anti-Covid curbs imposed by the local health officials. According to GlobalData, a leading data and analytics company, the Chinese e-commerce market is expected to achieve a compound annual growth rate (CAGR) at 8.7% between 2022 and 2026, though the growth rate is seen deteriorating compared to the period between 2018 and 2021 (CAGR was 13.3%). This actually shows a worrying sign in the bigger picture. High penetration rate and stiff competition has led to China’s e-commerce industry entering the maturity phase much faster than the rest of the world (and thus hurt the growth of sales for local companies), as displayed below:

Fig.2: E-Commerce Growth – China versus US, Europe and the Rest of World. Source: Indigo Digital

A slowing economy could also be an inevitable alert to the companies. In Q2 2022, China’s annual GDP growth rate was 0.4% (y/y), a sharp decline from that recorded in Q1 2022 which was 4.8%. This was also the softest pace of expansion since a contraction in Q1 2020.

Fig.3: China GDP Annual Growth Rate. Source: Trading Economics.

In the near-term, Alibaba may continue to be clouded by soft macro environment, weak consumer sentiment and its slower sales outlook. On the contrary, the current share price of the company may be seen as attractive following its “near historical” trough valuation. Last week post-market close, the Alibaba share price was seen at $79.98, below the low estimates given by analysts by -30.58%.

Fig.4: Reported Sales and Earnings Per Share (EPS) of Alibaba versus Analyst Forecast. Source: money.cnn

The Alibaba Group will report its Q2 2022 financial results on 4^th November (Friday). Market consensus remains flat, in which sales is expected to hit $210.3B (was $205.6B in Q1 2022 and $200.7B in Q2 2021). Consensus estimates for EPS stood at $11.77 (was $11.73 in Q1 2022 and $11.20 in Q2 2021).

Technical Analysis:

The #Alibaba (BABA.s) share price hit its all-time high on 27^th October 2020, at $319.27. It then suffered massive selling thus erasing all the gains from the past few years. To date, the high and low of the share price in the period of 52-week are $182.07 and $73.27, respectively. Technically, it is currently hovering at the psychological mark at $80. A strong bullish breakout above this level may indicate short-term correction, with the 100 daily SMA and $104 being the next resistance to watch. On the other hand, if the share price remains pressured below $80, this could indicate the bearish pressure remains intact. The next support levels are seen at $73.27 (52-week low), $65 and $40.85.

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Larince Zhang

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Market Update – October 3 – New Week, Month & Quarter

• USDIndex – Holds Friday’s range at 111.80. Dollar remains in demand following a weak 3rd quarter, HOT CORE CPE inflation on Friday and an emergency FOMC meeting  behind closed doors today. Asian stock markets struggle in key Holiday week, risk appetite remains fragile ahead of more rate hikes and US jobs on Friday. The JPY underperforms in the Asian session.  
• EUR – Trades at 0.9820 now, capped by an 8-day high at 0.9900 but off last weeks 0.9550 low. Alternative gas supplies began to flow over weekend for Greece, Bulgaria & Poland.
• JPY –  Remains weighed as 145.00 is tested once more. Fin. Min. Suzuki –  Japan stood ready for “decisive” steps in the foreign exchange market if excessive Yen moves persisted.
• GBP continued to recover following mini-budget inspired collapse last week. Capped at 1.1200 so far today ahead of Fin Min Kwartang’s speech. Rumours swirl of U-turns on tax cuts. 
• Stocks US stocks moved lower again on Friday remain pressured. Third Consecutive Quarterly fall, Largest percentage fall for Q3 in the S&P500 in 20 years, 3rd consecutive week lower and 2nd consecutive month lower.  The first 9-months of 2022 has been the worst since 2008.  APPL, MSFT lead tech lower on Friday, biggest losers Nike -12.8% & Carnival -23.3% both following warnings regarding margins due to inflation. Q3 Earnings now expected to be +4.5% down from 11.1% on July 1.

• USOil rallied over 3% to test $82.00 after weekend reports of OPEC+ cutting production “up to 1.5 million barrels per day”.
• Gold – holds at $1665 but remains and capped at $1675.
• BTC – rejected $20.0k on Friday and trades at $19.2k now.

Today  EZ, UK & US Final Manufacturing PMI, US ISM Manufacturing, Speeches from Fed’s Bostic, Barkin, George & Williams, BoE’s Mann & UK Chancellor Kwarteng.

Week Ahead – US Services,  RBA & RBNZ Rate decisions, ADP & CAD & US (NFP) Jobs

Biggest FX Mover @ (06:30 GMT) NZDJPY (+0.82%) Rallied from Friday’s collapse from 83.00 to 81.00, to test 82.00 today. MAs now aligning higher,  MACD histogram & signal line negative but rising, RSI 52.05 & rising, H1 ATR 0.253, Daily ATR 1.233.

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Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Bitcoin Forecast: Potential Jump Ahead

Bitcoin keeps moving along the supporting level of 19000 without breaking it through. Bitcoin is still likely to pull from the level of 19000 and target the level of 22000 next.As it can be seen from the daily chart, the price of Brent oil has dropped below the supporting level of 87.28, forming engulfing and signifying the continuation of the downtrend or deep correction. So, it seems that oil is likely to head south next week and target the level of 78 next. Евродоллар закрылся в пятницу под уровнемсопротивления 0.9865, но немножко не коснулся указанной линии. С другойстороны, цена сейчас тестирует пробитую сторону большего дневного клина. Впринципе, на следующую неделю стоит рассмотреть потенциальный сценарий снижениякотировок, который будет ограничен поддержкой 0.9595:

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