Welcome to the Weekly Market Update!
In this edition, we bring you the latest highlights and insights from the world of finance. We will cover the week’s top stories, provide market analysis, highlight economic developments, discuss upcoming events to watch, and present technical analysis. Let’s delve into the key information you need to stay informed and make informed financial decisions.
Top Stories of the Week
- US Treasury Yields Soar: Yields on long-term US bonds hit a 16-year high this week, later retreating slightly. Bill Ackman predicts the 10-year yield could reach 5% soon.
- Gold Hits Six-Month Low: Gold continued its decline, reaching $1815, influenced by rising treasury yields and expectations that the Fed will maintain higher rates.
- Tim Cook’s Major Share Sale: Apple’s CEO sold 511,000 shares worth about $88 million, netting him $41.5 million, marking his largest sale in two years.
- EUR/USD Hits 2023 Low: The currency pair reached its lowest point since last December, driven by a surging USD and eurozone economic concerns.
- Intel’s IPO Plans: Intel intends to spin off its programmable chip unit as a separate business and is planning an IPO within the next 2-3 years.
Market Analysis
- Oil Prices Experience Steep Decline: Brent and WTI crude saw their prices plummet, closing at $85.81 and $84.22 per barrel respectively, marking their largest single-day drop since August 2022. This sharp reversal comes just a week after prices nearly touched $100 a barrel, buoyed by strong global demand and extended production cuts from Saudi Arabia and Russia. The decline was triggered by rising interest rates, which hit a 16-year high, dampening economic growth prospects and potentially impacting oil demand. The U.S. Energy Information Administration reported a 6.5 million barrel increase in gasoline stocks, while crude stocks fell by 2.2 million barrels.
Economic Highlights
- Yen’s Sudden Strength Sparks Intervention Speculation: The yen surged against the dollar, briefly pushing it below the 150 level, leading to suspicions of Japanese government intervention to support the currency. This comes amid a prolonged depreciation of the yen and heightened market volatility. While some analysts argue the move was too small to indicate official action, others see it as a likely intervention, especially given Japan’s history of stepping in to stabilize its currency. The Bank of Japan and the Ministry of Finance remained tight-lipped, adding to the market’s nervousness. The yen’s ongoing weakness complicates matters for Japanese firms and the import-dependent economy.
Upcoming Events to Watch
- US CPI & FOMC Minutes (Oct 12): With US inflation cooling to 3.7% YoY in September but rising 0.6% MoM, markets are keen to see if the trend continues. A hotter inflation rate could solidify another Fed rate hike this year. The minutes from the Fed’s September meeting will also be scrutinized but are expected to be secondary to the CPI data.
- UK GDP Update: The UK economy shrank by 0.5% MoM in July, raising concerns about its health. Recent PMI data indicates a contraction in business activity from July to September. A downturn is anticipated for the latter half of the year, keeping investors cautious.
- Q3 Bank Earnings (Oct 13): U.S. banks like Wells Fargo, JP Morgan & Co, and Citigroup will release Q3 earnings. High interest rates are expected to boost net interest income, but investment banking fees may decline due to economic challenges. Watch for updates on bad loan provisions.
- Q3 PepsiCo Earnings (Oct 10): PepsiCo is set to announce Q3 results, with an expected EPS of $2.15, up 9% YoY, and revenues likely to increase 7% to $23.43 billion. The company’s ability to pass on price hikes due to a strong job market will be in focus.
Technical Analysis
We have analyzed the most popular trading pairs and assets, including EUR/USD, GBP/USD, Gold, and US500. Our aim is to provide you with an insightful analysis of their trends and support/resistance levels, which will help you make informed decisions.
EUR/USD
Following 11 consecutive weeks of drops, last week ended on a high note. The pair briefly dipped under key support levels before rebounding. The uptick came after better-than-expected U.S. jobless numbers on Friday. Many analysts believe the rise was due to slower wage growth. Moreover, U.S. inflation keeps falling, while recent data from Europe has shown improvement.
GBP/USD
The GBP-USD pair was previously moving within a downward channel, but now we’re witnessing a bullish breakout. Anticipation of another Fed rate hike in November is high, backed by universally hawkish remarks aimed at bringing inflation down to 2%. This is further reinforced by encouraging data. As for real yields, which are calculated as bond yield minus inflation, they’re favorable for the dollar but not so for the GBP and EUR.
XAU/USD
Global gold prices are rising, with an instant jump of $2.5, reaching a trading high of $1835.6 per ounce. Despite a strong uptick in both the USD and U.S. Treasury yields this morning, investors continue to buy gold as a risk hedge. The USD is gaining ground globally and saw a significant rise in its international trading basket. The Dollar Index, which gauges the USD’s strength against six major currencies, rose by 0.24% from the last session, hitting 106,300 points.
XUS500
The market is showing signs of recovery after three straight weeks of decline, with bulls gaining momentum. When two out of the three major U.S. stock indices—SPX, DJI, and IXIC—fail to confirm a new high or low, it often hints at a shift in trend. Although October is typically a bearish month, there are instances where the market bottoms out early in the month. Last week’s NFP data exceeded expectations, adding about 330k new jobs, indicating a robust labor market. This strengthens the Fed’s argument for further interest rate hikes, which is generally not good for the SP500.
Thank you for reading! Wishing you successful trades ahead!
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