Spreadex Market Update
Earnings Boost Risk Appetite, RBA Holds Off on Hike
The financial markets witnessed a surge in risk appetite as upbeat earnings reports stole the spotlight, overshadowing geopolitical concerns in the Middle East. While the dollar took a backseat, gold and oil markets also saw a brief respite from their recent fluctuations.
Key Factors for Today
- Upbeat earnings reports bolster risk appetite amid Gaza conflict tensions.
- WTI oil prices take a breather amidst rumours of a potential US-Venezuela sanctions deal.
- Reserve Bank of Australia (RBA) contemplates a rate hike but lacks sufficient data to proceed.
- Country Garden faces default risk unless a $15 million coupon payment is made.
Market Movers
- Earnings reports exceeded expectations, lifting risk sentiment despite rising yields and geopolitical tensions. The US dollar weakened as Federal Reserve Bank of Philadelphia President Patrick Harker reiterated caution on further rate hikes. Gold prices dipped, hovering around $1900, with the $1930 level in focus.
- Saudi Arabia's crude exports hit a two-year low, while oil production cuts persist. WTI oil prices declined over 1% on rumours of potential US sanctions relief for Venezuela, with support at $85.5 per barrel. A breakthrough above $88.60 could drive prices towards $90 per barrel.
- RBA considered a 25bps rate hike in October but opted to hold due to insufficient data. The market perceives a 25% chance of a hike in the near future, supporting the Aussie dollar's strength.
- Country Garden faces potential default if it fails to make a $15 million coupon payment, raising concerns beyond China and impacting Asian markets, including the Nikkei index.
Economic Calendar
- GB Jobs Report
- EA ZEW Sentiment
- DE ZEW Sentiment
- Fed Williams Speech
- CA CPI Inflation
- Retail Sales
- Industrial Production
- Fed Bowman Speech
The Big News
Earnings Reports Boost Market Confidence Amid Geopolitical Tensions
Earnings reports continue to be the driving force behind the surge in risk appetite. Despite mounting geopolitical fears and rising yields, corporate earnings have outperformed expectations for the second consecutive session. This impressive performance has buoyed investor confidence, prompting a decline in the US dollar. Federal Reserve Bank of Philadelphia President Patrick Harker's reaffirmation of the central bank's cautious stance on rate hikes further contributed to the dollar's weakness. Moreover, the Empire State Index turned negative, further underscoring the need for cautious monetary policy.
Saudi Arabia's Crude Exports Hit 2-Year Low as Oil Market Rollercoaster Continues
In the oil market, Saudi Arabia's crude exports hit their lowest level in over two years, despite production and voluntary cuts aimed at stabilizing prices. Oil prices have been on a rollercoaster ride in recent months. WTI oil prices retreated on reports suggesting that the US could ease sanctions on Venezuela's oil, adding to market uncertainty. The focus now lies on whether prices can hold above the $85.5 per barrel support level or make a convincing move towards $90 per barrel.
RBA Holds Off on Rate Hike, Citing Data Uncertainty Amid Inflation Projections
The Reserve Bank of Australia (RBA) deliberated on a potential rate hike of 25 basis points at its recent monetary policy meeting. However, the central bank decided to hold off, citing a lack of adequate data to justify an immediate increase. Despite projecting that inflation may reach the target range by late 2025, the RBA remains cautious and may consider hiking rates if inflation persists. The market's 25% probability of a hike reflects the ongoing uncertainty in the Australian economy.
Country Garden's Impending Default Threatens Asian Markets Beyond China's Borders
Country Garden teeters on the brink of default if it fails to make a $15 million coupon payment by the impending deadline. The company had previously warned of its inability to meet offshore payment obligations, and this potential default could have far-reaching implications beyond China's borders. Asian markets, including the Nikkei index, face volatility and the risk of revisiting lower levels, with peak resistance seen at 32580.
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