Spreadex Market Update
Stocks turn higher in rebound from BOJ shock
Just when things were looking bleak, the chance of a Santa rally now looks a little better than it did 24 hours earlier. The shock BOJ policy change sent the yen soaring and stock markets sliding but by the end of the day the yen was still higher but so were stocks (just).
Key Factors for Today
● Stock indices post small gains (despite BOJ)
● USD/JPY sits near 4-month lows
● Elon Musk tweets justification of TSLA share crash
● Nike & FedEx earnings
Noteworthy
- Canada Inflation due
- Zelensky visits Washington DC
- Pentagon says there is no evidence of imminent Belarus action in Ukraine (Reuters)
Stock indices post small gains (despite BOJ)
When the BOJ made its policy change, it looked like it could be very bad news for European and US indices. However, things turned out differently in the end. Most major indices finished flat to slightly higher, resulting in bullish ‘hammer’ candle patterns for most. Both the S&P 500 and the Euro STOXX 50 posted hammers at the 3800 round number, while the Dow turned higher from its 50-day moving average, only a few days after a so-called ‘Golden Cross’ where the 50-day crosses over the 200-day MA. Of course, there is still plenty of justification for prices to fall further into the end of the year, the hammer patterns signal that indices got a little oversold and there is room for further short-covering.
USD/JPY sits near 4-month lows
The Bank of Japan (BOJ) yesterday announced that it would be widening the yield band on 10-year Japanese government bonds (JGBs). This move has led markets to speculate that there could be further policy adjustments in the future. Since the introduction of yield curve control (YCC) policy, long-term yields have been mostly depressed. However, with the recent widening of the yield band, yields are now allowed to rise, which could close the yield gap between Japan and other countries like the US. This could lead to further declines in USD/JPY. USD/JPY is rising early Wednesday, topping 132 in a modest reaction to the huge moves seen on Tuesday, which saw the price break its 200 DMA and probe lows last seen in August just above 130.50.
Elon Musk tweets justification of TESLA share crash
As Tesla shares slumped 8% on Tuesday to a fresh 52-week low, CEO Elon Musk turned to his new venture Twitter to give his explanation as to what was happening.
Musk explained the macroeconomic effect of rising interest rates on stock valuations in a tweet. “As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are not guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop.”
However shareholders are complaining that Twitter is a distraction at a time when economic uncertainty and supply disruptions in China pose large problems for Tesla.
Nike & FedEx earnings
FedEx (FDX) Q2 23 (USD): Adj. EPS 3.18 (exp. 2.80), Revenue 22.8bln (exp. 23.7bln). FY23 capex view cut by 400mln to 5.9bln.
Nike Inc (NKE) Q3 2022 (USD): EPS 0.85 (exp. 0.65), Revenue 13.32bln (exp. 12.57bln).
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