October 14 Financial Breakfast: Inflation data consolidates bets on the Fed’s insistence on aggressive interest rate hikes, USD/JPY hits a 32-year peak, and short covering drives U.S. stocks V-shaped reversal
Beijing time on Friday (October 14) in early Asian trading, the US dollar index traded around 112.49; the dollar fell in choppy trading against most currencies on Thursday after soaring in early trading after the U.S. inflation report was hotter than expected. Some investors believe that the market’s initial reaction to the data was overdone; U.S. stocks rose sharply, with the three major indexes closing up more than 2%, as technical support and investor short-covering pushed the market to rebound strongly after earlier losses; data After the announcement, USD/JPY briefly hit a 32-year peak of 147.665 before paring gains, gold prices fell, and oil prices closed more than 2% higher as lower diesel stock levels ahead of winter sparked buying and reversed higher-than-expected crude oil and gasoline inventories subsequent decline.
Commodity closing:Brent crude for December delivery rose 2.29% to $94.57 a barrel. U.S. crude rose 2.1% to $89.11 a barrel. U.S. gold futures ended little changed at $1,677.00 an ounce.
U.S. stock market close:The Dow Jones Industrial Average climbed 2.83% to 30,038.72; the S&P 500 jumped 2.60% to 3,669.91; the Nasdaq added 2.23% to 10,649.15.
Friday ahead
Kansas Fed President George speaks on the U.S. economic outlook, Fed Governor Cook speaks on the economic outlook
Global Market at a Glance
U.S. stocks rallied on Thursday, with all three major indexes closing up more than 2 percent, as technical support and investor short-covering helped the market rebound strongly after earlier losses.
In today’s sharp reversal, the S&P 500 jumped nearly 194 points from an intraday low to high, the index’s biggest intraday point gain since Jan. 24. Financials and energy stocks led gains among S&P 500 sectors.
Markets fell after data showed the consumer price index (CPI) rose 8.2% in September from a year earlier, on expectations of an 8.1% rise.
“People were probably net short before the CPI report, saw it was negative, and started covering shorts,” said King Lip, chief investment strategist at Baker Avenue Asset Management. Some strategists also noted that the S&P 500 was in There is some technical support near 3500.
“It’s a technical factor,” Lip said, adding that the recent sharp sell-off in the stock market could mean “the bad news may have been priced in. Going into earnings season, what we really need is that things aren’t going as expected. so bad.”
Investors are waiting to see how the high-interest-rate environment affects their profits as some of the biggest Wall Street banks report results on Friday, kicking off the third-quarter earnings season. Walgreens rose after the company reported better-than-expected fourth-quarter earnings. Advancing issues outnumbered advancing ones by a 2.24-to-1 ratio on the NYSE; a 2.10-to-1 ratio on the Nasdaq.
Three S&P 500 stocks posted new 52-week highs and 172 new lows; five Nasdaq stocks posted new highs and 600 new lows.
precious metal
Gold prices fell on Thursday as U.S. consumer prices rose more than expected in September, cementing bets that the Federal Reserve will stick to aggressive rate hikes. The Labor Department said the U.S. consumer price index (CPI) rose 0.4% in September after rising 0.1% in August. In the 12 months through September, the CPI rose 8.2% after rising 8.3% in August.
David Meger, head of metals trading at High Ridge Futures, said the data pressured gold by signaling that the Federal Reserve will raise rates at a faster pace to fight inflation more aggressively. The yield on the benchmark U.S. 10-year Treasury note climbed after the data. Rising interest rates and bond yields have reduced the attractiveness of non-yielding gold.
“Before the report, there was some optimism that we had seen consumer price growth slow, and as the data showed that wasn’t the case, we saw a clear result,” Meger said. U.S. interest rate futures traders have almost Fully priced in for a fourth straight 75 basis point rate hike by the Fed at its Nov. 1-2 meeting, they began pricing in a 10% chance of a one-percentage-point hike next month after the inflation data.
Spot silver fell 0.9% to $18.87 an ounce, platinum rose 1.9% to $897.00 an ounce and palladium slipped 1.3% to $2,107.78 an ounce.
Oil prices closed up about 2 percent on Thursday as low diesel stockpiles ahead of winter sparked buying and reversed losses after crude and gasoline inventories were higher than expected.Distillate stockpiles, which include diesel and heating oil, fell by 4.9 million barrels in the week ended Oct. 7 to 106.1 million barrels, the lowest since May, the U.S. Energy Information Administration (EIA) said, versus expectations for a 200-barrel drop million barrels. That prompted investors to shrug off a surprise 2 million-barrel build in gasoline inventories and a larger-than-expected rise in crude oil inventories to nearly 10 million barrels.
“The most troubling part of the (EIA) report is that distillate inventories are well below average,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “Winter is coming. The market is looking at the big picture, not the impact.” Short-term demand numbers for storm impacts.”
Many investors remain concerned that rising inflation will weaken fuel demand. The International Energy Agency (IEA) has warned that the global economy could slip into recession. U.S. consumer prices rose more than expected last month and underlying inflationary pressures continued to build, reinforcing expectations that the Federal Reserve will raise interest rates by a fourth straight 75 basis points next month.
U.S. President Joe Biden said U.S. gasoline prices are still too high, and he will speak on cost reductions next week. Energy markets also faced pressure from the dollar, which has rebounded broadly, including against lower-yielding currencies such as the yen.
foreign exchange
The dollar fell in choppy trade against most currencies on Thursday after surging in early trade after a sizzling higher-than-expected U.S. inflation report, but some investors believed the market’s initial reaction to the data was overdone. After the data was released, the dollar briefly hit a 32-year peak of 147.665 against the yen, then pared gains and rose 0.2 percent to 147.25 yen in late New York trading.
The euro also initially fell to a two-week low against the dollar, before rebounding to trade up 0.7% at $0.9773. Greg Anderson, global head of FX strategy at BMO Capital Markets, said the current FX move “is a sign of market stress, panicking about a slight deviation in one data point. The dollar’s reversal is a shock. It’s a super jittery market. , a tiny flow can have an exaggerated impact.”
Data showed U.S. consumer prices rose more than expected in September and core inflation pressures continued to rise, cementing expectations the Federal Reserve will raise interest rates by another 75 basis points at its policy meeting next month.
The consumer price index (CPI) rose 0.4% last month after rising 0.1% in August. Economists polled by Archyde.com had forecast a 0.2 percent rise in the CPI. In the 12 months through September, the CPI rose 8.2% after rising 8.3% in August. Fed funds futures also pegged a 13.4% chance of a 100 basis point hike next month after the data.
Brian Westbury, chief economist at FT Advisors, said: “Despite some improvement in the factors that are said to have pushed inflation up, inflation is still there – think energy prices and used car prices, which fell 1.1% in September. It’s because headline inflation is, and has always been, a monetary phenomenon. The problem is that the Fed thinks it can manage inflation by targeting short-term interest rates. We think the Fed needs to focus less on raising rates and more on keeping money supply growth under control. “
Traders generally remain focused on Japan’s intervention to support the struggling yen. Officials reiterated that they stand ready to take appropriate steps to counter excessive currency volatility, although it remains unclear whether they want to defend specific levels.
BMO’s Anderson said, “I do think the Treasury will order another round of intervention in the next few weeks, and I think they will intervene somewhere at 148 yen. While that may only win a couple of dollars for the Treasury. weeks.”
The dollar also rose against the Swiss franc earlier, hitting its highest since May 2019. The dollar was last up 0.2% at 0.9995 Swiss franc; the Australian dollar briefly fell to a 2-1/2-year low at $0.6170 before recovering to $0.6291, up 0.3%. Meanwhile, the pound rose sharply against the dollar after reports that the British government may make changes in its fiscal plan.
Sterling was last at $1.1306 in New York, up 1.9%. The pound rose to a five-week high against the euro. The euro was last at 8641 pounds, down 1.1%.
Sky News reported on Thursday that the British government is discussing changes to the fiscal plan announced last month and examining which parts of the tax cut package might be dropped, leaving Prime Minister Truss facing yet another policy reversal.
market news
ECB hawks want to start shrinking balance sheet in early 2023
The ECB’s hawks prefer to let the central bank’s holdings automatically mature (when they are not reinvested in those assets), rather than sell assets on the balance sheet. Central bank hawks hope to start shrinking their balance sheets in early 2023, and they hope to implement quantitative tightening (QT) in a back-office manner, and continue to focus on interest rates.
Italy’s central bank cuts its 2023 economic growth forecast
On the 13th local time, the Bank of Italy announced that due to the high uncertainty of the economic situation, it lowered its forecast for Italian economic growth in 2023 by 1 percentage point, from an increase of 1.3% in July to an increase of 0.3%. Italy’s central bank said it expects the Italian economy to experience negative growth of 1.5 percent in 2023, before rebounding in 2024, if there is an unfavorable situation in Russia’s energy supply cuts and trade slowdown.
Gazprom: Repairing “North Stream” will take more than a year
Gazprom President Miller said on the 13th local time that in order to repair the damaged “North Stream” pipeline, most of the pipelines may need to be replaced, and the repair work will last more than a year. Miller said large sections of the pipeline are currently full of seawater.
The number of listed companies on the Beijing Stock Exchange has increased to 117, which will further expand the coverage of innovative SMEs
On October 14, Haineng Technology was listed on the Beijing Stock Exchange. As a result, the total number of companies listed on the Beijing Stock Exchange increased to 117. On the 11th month of the opening of the market, the North Exchange has entered the “high-quality expansion” lane. 19 companies have gone public since July. Zhou Guihua, chairman of the Beijing Stock Exchange, proposed to promote the high-quality expansion of the Beijing Stock Exchange, including: implementing the “process reengineering” that integrates enterprise cultivation, listing access, daily supervision, and listing review to improve the quality and efficiency of review, so that high-quality companies can be listed faster, Better development; strengthen the quality control of issuance and listing review, better play the role of the listing committee as a gatekeeper; enhance industry inclusiveness and expand the market coverage of innovative small and medium-sized enterprises. (Securities Daily)
In order to avoid peak energy consumption in winter, French sugar factory starts ahead of schedule
In order to avoid the risk of power outages that may occur in winter, French sugar companies were forced to start production ahead of schedule in September. After negotiation between sugar mills and beet farmers, about 10% of farmers agreed to pick two to three weeks in advance. For this reason, they had to pay farmers more money to make up for their losses. This, coupled with rising energy prices, has led to rapid increases in production costs. The sugar industry is a major energy consumer. The natural gas consumption of a sugar factory during the production season is the sum of 100,000 households. (CCTV)
Sixth U.S. railroad union accepts Biden-backed labor deal
A majority of railroad workers, represented by the National Association of Firefighters and Oilers (NFCO), voted to accept a labor deal brokered in part by U.S. President Joe Biden last month, with 58.7 percent of voters in favor. Five unions had previously agreed to accept the agreement. In a statement, NFCO President Dean DeVita said that despite accepting the labor agreement, many NCFO members were “disappointed with the terms”, with sick leave and leave policies being important issues. Five other unions reportedly plan to close the ballot in mid-November, after one union rejected a tentative deal.
Saudi confirms U.S. government’s request not to cut oil output in midterm election month
Saudi Arabia’s foreign ministry confirmed on the 13th that the U.S. government had asked Saudi Arabia and other major oil-producing countries to delay by one month a plan to sharply cut crude oil production starting in November this year. According to the Associated Press interpretation, the Biden administration has asked Saudi Arabia to delay oil production cuts for one month, in order to reduce the risk of oil prices soaring ahead of the U.S. midterm elections in November, so as to favor the Democratic election. Saudi Arabia has “straightforwardly” rejected the U.S. request. US President Biden said on the 11th that Saudi Arabia’s actions “will have consequences.” (CCTV News)
Americans will pay biggest price for insulation in 25 years this winter
The average U.S. household electricity bill is expected to be $1,359 this winter, which would be the highest level since at least 1997, according to the latest data from the EIA. While much of the surge in electricity prices is driven by high natural gas costs, households that rely on oil for heating — such as the Northeast — will be hit harder, with an average electricity bill of $2,354.
The prospect comes as shortages of diesel and natural gas make winter hard for households around the world. In Europe, the war in Ukraine has exacerbated already strained gas markets, and governments are making contingency plans to keep energy supplies going. Higher energy costs are fueling historic inflationary pressures, with consumers already paying more for everything from gasoline to groceries.
In the U.S., diesel supplies are at their seasonally lowest levels on record, while natural gas inventories are 6% below their five-year average. The energy crunch will primarily affect the northeastern United States, which has limited natural gas pipeline capacity and relies on diesel for heating.
Prices for both natural gas and distillates, including heating oil, will rise nearly 30 percent this winter, the agency said. Distillate output is expected to remain at last year’s level, although higher U.S. production could boost natural gas inventories.
Poland starts repairing ‘Friendship’ pipeline
On October 13, local time, the Polish Petroleum Pipeline Operating Company (PERN) said in a statement that the company’s technical department has begun to repair the “Friendship” oil pipeline, “the goal is to restore the operation of the main pipeline as soon as possible and fully realize the crude oil pump. deliver”. The statement said that between the evening of the 12th and the early morning of the 13th, the oil in the damaged pipeline had been cleaned up, creating safe conditions for the repair of the pipeline. Meanwhile, the investigation into the cause of the incident is still ongoing, and the technical department has located the leak, with preliminary findings showing “no sign of third-party intervention.” (CCTV News)