Hey Folks, markets continue in a bullish fashion as price action shows continued upside strength. I am beginning to see some tired action however and am anticipated some sideways to downside action over the remainder of October.
Get my take on the current markets and where we will go from here.
MARKET SOUND BITES
Markets’ late rally helped large-cap stocks notch their fourth consecutive weekly gain despite growing tensions in the Middle East. The prospect of a wider war in the Middle East sent oil prices to their highest level in about a month, benefiting energy shares. Markets started off in a relatively quiet week quickly picked up steam following reports that Iran was preparing to launch a retaliatory ballistic missile attack against Israel which they later did as socks pulled back sharply. Another complication in the form of the start of a walkout by workers that effectively closed operations at every major port on the East and Gulf Coasts, which together represent the capacity to handle as much as half of all U.S. trade volumes.
On Monday, the Institute for Supply Management (ISM) reported that its gauge of factory activity had unexpectedly remained steady in September at 47.2, which is still firmly in contraction territory (levels above 50.0 indicate expansion). In stark contrast, the ISM’s gauge of services sector activity, reported Wednesday, jumped much more than expected to 54.9, its highest level in 19 months. Less favorably, the report also showed price pressures in the sector increasing to their highest level since the start of the year. Nevertheless, the news seemed to be overshadowed as trading resumed Friday morning by the closely watched monthly nonfarm payrolls report. We saw that employers added 254,000 jobs in September, nearly twice the consensus estimates and the most since March. August’s gain was also revised higher. The household survey also brought better-than-expected news, with the unemployment rate unexpectedly ticking lower to 4.1%. Average hourly earnings rose 0.4% in September on the heels of an upwardly revised 0.5% gain in August—the fastest pace since the start of the year.
The jobs report led to a spike in longer-term bond yields, with the yield on the benchmark 10-year U.S. Treasury note spiking to its highest intraday level (3.98%) since August 8. The Job numbers also changed the upcoming rate cut forecasted amounts down to only 25 bps for Nov and 25 bps for Dec Fed meetings.
In Europe, the PMIs were pointing to weaker eurozone growth and inflation falling below the ECB’s 2% target combined to strengthen expectations of an interest rate cut in October. Annual headline inflation in the eurozone slowed to 1.8% in September, the lowest level since April 2021 and below forecasts for 1.9%. Core inflation also eased to 2.7% from 2.8% in August. The eurozone composite PMI reading for September was revised higher to 49.6 from 48.9. The BoE Governor Andrew Bailey said indicated the bank could become “a bit more aggressive” in lowering borrowing costs if the inflation rate continues to fall.
Japan’s stock markets suffered sharp losses around the start of the week as investors digested the country’s latest political developments. His monetary policy views are considered slightly hawkish, leading the yen to initially strengthen and sending stock markets lower. He said that the environment is not ready for an additional interest rate hike and stressed his hope that the economy will make progress in a sustainable manner toward the end of deflation with the monetary easing trend in place.
Chinese stocks surged in a holiday-shortened week as optimism about Beijing’s comprehensive support measures offset disappointing data. China’s factory activity contracted for the fifth consecutive month amid weak demand. The official manufacturing Purchasing Managers’ Index (PMI) rose to an above-consensus 49.8 in September from 49.1 in August. The value of new home sales by the country’s top 100 developers fell 37.7% in September from a year ago, accelerating from August’s 26.8% drop. Currently there are an estimated 90 million empty housing units, enough to house over 270 million people.
Enjoy this week’s round-up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
