Stocks start Q4 Strongly but Credit Suisse Fears Persist

Plenty of action yesterday as we kicked off the new week. Shares in Credit Suisse fell to fresh, all-time lows following speculation over the weekend that the bank is in financial difficulty. Many twitter users have been warning that the bank might be “the next Lehman Brothers”. As the stock hit new lows yesterday, the price of credit default swaps (essentially acting as insurance against default) hit record highs. While stock prices eventually bounced back yesterday amidst a broader risk recovery, sentiment remains weak with the bank’s stock down around 60% now on the year and fears of insolvency still swirling.

Key Factors for Today

- USD falls further on ISM manufacturing miss
- Credit Suisse volatility shrugged off as equities rally
- GBP strongest in FX again following government U-turn on fiscal policy
- RBA hikes again but by smaller 25bps
- Metals and commodities rally further on USD weakness

Coming Up

- EUR ECB’s Lagarde speaks
- USD Fed’s Williams & Mester speak
- USD US JOLTs job openings

Equities Capitalising on USD Weakness

Despite the fears around Credit Suisse, equities prices were able to gain some ground yesterday as the US Dollar correction deepened. A weaker-than-expected US ISM manufacturing number was seen leaning on the Dollar, allowing equities space to recover. US stock prices climbed over yesterday’s session with the S& reclaiming the prior 2022 lows. We’re seeing broad based gains across the European open today with all major indices trading firmly in the green.

GBP Rally Continues Amidst Government U-Turn

In FX, it’s still all about the comeback-kid on Tuesday; GBP. The Pound continues to rally firmly as the reversal from last week’s lows builds further. GBPUSD is now more than 10% up from all-time lows with EURGBP having reversed around 7%, GBP at better levels in both pairs than it was just prior to the crash. The announcement that the UK government will abandon plans to abolish the upper tax bracket have helped drive the recovery. There is now speculation that the government might bring forward its full budget review from the initially pegged November 23rd date.

RBA Hikes by Smaller 25bps

AUD has been higher today also following a further hike from the RBA overnight. The bank opted for a smaller 25bps hike, below estimates for a further 50bps increase, citing that it had increased rates “substantially” in a short period of time. Aussie bond yields saw their largest intra-day drop since 2008 in response to the news.

USD & JPY Weakest in FX

With risk currencies on the move, the weakest performers in the FX space so far today are once again USD and JPY. The USD doldrums are fuelling a lift across the board in the risk complex which in turn, is sapping safe-haven demand for JPY and looks set to continue while the current market themes remain.

Metals & Oil Firmly Higher as USD Falls

In the metals and commodities space, we’re seeing big gains this week. Both gold and silver are rallying firmly off the YTD lows with gold up around 6% and silver prices up almost 20%. Silver prices are benefiting from a weaker Dollar, higher equities prices as well as support from gold, suggesting a fuller breakout is underway. Oil prices have turned higher this week too with crude futures now up over 10% off the YTD lows as OPEC mull sits largest production cut since 2020.