Spreadex Market Update
Busy Thursday For Markets Sees USD Enjoying Fresh Demand
The last 24 hours have been a busy period indeed for markets with several key developments. Firstly, the ECB was seen hiking rates by 75bps as expected, taking its headline rate up to 2%, along with signalling further rate hikes to come. In contrast, the BOJ was seen keeping rates on hold, again, overnight, citing the need to support the economy. USD rallied as advance US GDP q/q was seen higher than forecast at 2.6% vs 2.3% expected, marking a sharp recovery from the prior quarter’s -0.6% reading. Elon Musk completed his $44 billion takeover of Twitter and, among the many moves he made on his first day, removed Donald Trump’s ban. Apple beat earnings forecasts though shares fell as the company warned of a December quarter and iPhone sales were seen falling.
Key Factors for Today
- USD revived by stronger-than-forecast GDP data
- Equities soften as USD rallies – DAX shrugs off ECB hike, stays firm
- BOJ sticks to easing stance – ECB hikes by 75bps
- Risk-FX knocked lower
- Oil and metals capped by USD rally.
Coming Up
- CAD Canadian GDP m/m
- USD US Core PCE
- USD Pending home sales
Equities Soften As USD Roars Back on GDP Beat
Equities prices took a hit yesterday as USD rallied in response to better-than-expected GDP data, with US indices suffering the most. Interestingly, the DAX remained strong despite the ECB hiking rates yesterday as traders interpreted Lagarde’s outlook as suggesting a slower pace of tightening moving forward. UK assets have been a little weaker following news that the UK PM has delayed the expected October 31st budget until mid November in order to get a better look at the nation’s finances.
Apple Beats Forecasts, Warns over Q4 Performance
The big focus in US earnings land yesterday was Apple’s Q3 results. The company posted EPS of $1.29, above the $1.26 the market was looking for, on revenues of $90.14 billion vs $88.74 billion expected. While the headline figures were decent, news of sharply declining iPhone sales were met with concern as was the company’s forecast for much weaker performance in the current quarter. Apple shares are now down around 6% from the intra-week highs.
USD Rally Leans On Risk FX – BOJ Holds Firm
In FX, the uptick in USD on the back of yesterday’s GDP data has seen a reversal of recent fortunes for risk currencies. Higher-yielding FX have turned lower into the end of the week with AUD the worst performer over the European open on Friday. JPY has come back under pressure also, despite the drop in equities prices, as a dovish BOJ meeting saw the bank reaffirming its commitment to keeping easing in place.
ECB Hikes But Signals Slower Tightening To Come
The ECB was seen hiking rates by a further 75bps as expected yesterday. However, Lagarde’s comments that while further increases were likely, ‘substantial progress’ had been made on rates, was interpreted by the market as suggesting a slower pace of tightening going forward. EUR was seen sharply lower on the back of the meeting consequently.
Metals & Oil Capped by Fresh USD Rally
In the metals and commodities space, both gold and silver came back under pressure yesterday amidst the fresh strength we saw in USD. Both metals are weaker again today, suggesting a likely continuation into next week if USD remains firm today. Oil prices are weaker across the European open today also though crude futures are sitting above last week’s highs still, for now.
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