Weekly Trading Update
Week of November 7
This week will be all about the US midterm election as markets try to contend with the Fed’s soft pivot to smaller hikes for longer and as earnings season winds down.
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The week in review
Markets were mostly in a holding pattern through the first half of the week with holidays in Europe and with anticipation for what the FOMC would decide.
- The FOMC raised rates by 75bps as expected, pushing the reference rate to the highest since December 2007. Comments by Powell weighed on the market for the rest of the week after he suggested rates would go even higher than expected, though at a slower pace. EUR/USD didn't manage to hit parity, sliding to 0.9730.
- The BOE also hiked by 75bps as expected, with fewer dissenters than last time. Bailey said that rates would likely not rise as high as the market expected. Cable fell more than 4%.
- Elon Musk officially took control of Twitter, which made for an interesting week for regular tweeters adjusting to the new content moderation policies. Of course, since Elon Musk took the company private, TWTR shares are no longer available to trade.
- Rumours intensified in China that an unofficial end to rolling lockdowns was coming. The Hang Seng index rose more than 11% but settled near 9%.
- Russia returned to the grain export deal with Ukraine just days after suspending the agreement after an attack on its ships in Sevastopol.
TOP EVENTS IN The week ahead
Midterm for starters
Tuesday see Americans turn out to vote in the midterm elections, with results expected through the night. Latest polls suggest Republicans will take control of the House, but the Senate is a toss-up between Republicans and Democrats.
Stocks haven shown a tendency to rise following midterm elections as the uncertainty is removed, which would be a well-needed outcome following the Nasdaq's ~7% loss.
US data
On Thursday, CPI figures show a reversal of the most recent trends. Annualised headline inflation is expected to tick up to 8.2% from 8.1%, but core inflation is expected to tick down to 6.6% from 6.7%. USD/JPY could continue consolidating, but it might remain below 150.00.
On Friday, Michigan Consumer Sentiment is expected to improve. Friday is also Armistice Day in Europe and Veterans' Day in the US, which implies slower news flow and the potential for less trading volume.
European data in focus
The week starts in Europe with a Eurogroup meeting, rumoured to discuss another package of sanctions on Russia. Europe's 50 index and WTI might be partially impacted. The former needs a break past 3680 or risk falling to 3500, whereas the former must recapture $94/bbl for a chance of reaching triple digits; otherwise, head back to 85/bbl.
However, the big data isn't until Friday with the release of the monthly UK GDP, which is expected to come in negative. Not a major surprise after the BOE said that the country was already in a recession. The nearly 3% rise in FTSE might experience profit-taking above the 7k handle. 7380 is a ceiling.
Germany is expected to confirm its double-digit inflation numbers on the same day. Germany's index is in a range just above the 13k handle.
Other events
Monday has Australia Consumer confidence. Tuesday sees EU retail sales and Chinese PPI. Thursday has New Zealand PMI. Friday has the UK trade balance.
Earnings
Earnings include Walt Disney, Marks & Spencer, Siemens Healthiness, AstraZeneca, Becton Dickenson and ArcelorMittal
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