Hey Folks, the force with the “buy the dip” crowd is very strong. After a very bad start to the trading week we ended up closing mostly unchanged with a number of key events effecting price action. Check out my take below in this weeks Round-Up
WEEKLY SOUND BITES;
- The major benchmarks overcame an early sell-off to end the week flat to modestly higher. Longer-term bond yields rose sharply over the week, helping financials shares by holding the promise of improving banks’ lending margins. The large downbeat start to the week appeared to be due to several factors, primary among them, were fears that a possible default by China’s second-largest property developer, Evergrande might set off a global financial “contagion” similar to what followed the collapse of Lehman Brothers in September 2008. Stocks regained a large portion of their losses on Wednesday, however, which T. Rowe Price traders attributed to news of a restructuring plan for Evergrande, along with a capital injection into the Chinese banking system. The other closely watched event of the week was the Federal Reserve’s two-day policy meeting that concluded Wednesday. As was widely expected, policymakers announced that they would soon consider tapering the central bank’s purchases of Treasuries and mortgage-backed securities, a move that would reduce some downward pressure on longer-term interest rates. According to the Federal Open Market Committee’s (FOMC’s) updated Summary of Economic Projections, officials’ projections for the timing of an interest rate liftoff are now evenly split between 2022 and 2023. Additionally, a majority of officials now anticipate at least three quarter-point rate hikes by the end of 2023.
- The week’s jobs data appeared to defy hopes for a resurgence in the labor market, with first-time jobless claims rising to 351,000, well above consensus forecasts and the highest number in a month. survey of both manufacturing and services sector activity in September also came in modestly below expectations but still indicated healthy expansion. Housing data mostly came in on the upside, with both housing starts and permits easily surpassing expectations.
- The coming wind-down of the central bank’s monthly asset purchases and mildly hawkish revisions to its interest rate forecasts helped push the yield on the benchmark 10-year U.S. Treasury note significantly higher later in the week. On Friday, the 10-year yield hit an intraday peak of around 1.47%, its highest level since the start of July.
- The Bank of England (BoE) kept its key rate unchanged at 0.10%, although two policymakers voted for an early end to the quantitative easing program. The BoE now expects “inflation could remain above 4% into the second quarter of 2022. Growth in eurozone economic activity slowed noticeably in September from July’s 15-year high, while input prices jumped to a 21-year high. The pace of growth slowed further in both the manufacturing and services sectors.
- The latest Kyodo News poll shows that Vaccination Minister Taro Kono is viewed by the ruling Liberal Democratic Party (LDP) members as the favored candidate to replace outgoing Prime Minister Yoshihide Suga as the party leader in the September 29 presidential election. His policies suggest that he’d be supportive of additional stimulus measures and the central bank’s current policy stance. The Bank of Japan (BoJ) made no changes to its long- and short-term interest rate policy at the September policy meeting and confirmed its stance on maintaining asset purchases at current levels.
- Over in China, many analysts believe they will step in to contain the financial fallout ensuing from an Evergrande bankruptcy or default. Many believe systemic risk is unlikely as Evergrande’s outstanding debt amounts to a negligible amount of the country’s total banking assets.
Enjoy this Week’s Round-Up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
