Market correlations seemed to be all over the place on Monday, as Crude Oil experienced a massive sell-off while US stocks made good gains.
What’s up with that?!
Read on to see the latest headlines and economic reports driving price action so far:
Titles:
- Chinese Minister of Finance She said on Saturday that the government would “significantly increase” debt issuance to boost economic growth and help the property market but did not provide details
- China conducted large-scale military exercises in the vicinity of Taiwan and remote islands to warn of “independence forces” on the island claimed by Beijing
- OPEC also reduced oil demand growth expectations for 2024 by 106 thousand barrels per day to 1.9 million barrels per day and reduced its expectations for 2025 by 102 thousand barrels per day
- Israeli Prime Minister Netanyahu He tells the United States that he is willing to strike military, but not oil or nuclear, facilities in Iran
- Consumer Price Index in China unexpectedly fell from 0.6% y/y to 0.4% y/y (0.6% expected) while producer price deflation deepened from -1.8% y/y to -2.8% y/y (-2.5% expected) in September
- New Zealand’s BusinessNZ services index was unchanged at 45.7 in September; The employment rate fell from 49.4 to 45.7
- Retail purchases in New Zealand using credit and debit cards fell another 0.7% quarter-on-quarter in the third quarter after a 2.5% decline in the previous quarter.
- Chinese trade surplus Narrowed from US$91 billion to US$81.7 billion in September (expected US$91.5 billion) as exports rose 2.4% while imports grew 0.2%
- US markets were closed in observance of Columbus Day, and Canadian markets were closed in observance of Thanksgiving
- Neel Kashkari, a non-voting member of the Federal Open Market Committee, said “more modest cuts” were likely and would be appropriate in coming quarters.
- FOMC Voting Member Christopher Waller He believes the Fed should “proceed more cautiously on the pace of interest rate cuts than was called for at the September meeting.”
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
Even market holidays in the US and Canada were not enough to prevent major asset classes from making big moves on Monday!
Crude oil started on a weak footing, in response to weekend updates on the demand outlook for the commodity. For example, OPEC announced a reduction in its global consumption forecasts for this year and next, its third reduction so far this year. Moreover, Chinese authorities have once again failed to convince markets of their stimulus plans since failing to provide concrete details.
The energy commodity moved sideways as the Asian session continued, before suffering another decline as London markets opened and recording a deeper decline at the end of the American session.
On the other hand, US stock indices were able to get support from the strong performance in the technology sector, led by Nvidia shares, which closed at record levels. The S&P 500 and Dow Jones hit new highs, rising 0.77% and 0.47% respectively, while BTC/USD also caught some risk-on action as it rose back above $66,000.
Forex market behavior: US dollar against major currencies:
Overlay of the US dollar against major currencies Chart by TradingView
The US dollar was off to a good start, likely to benefit from risk-off sentiment from the weekend’s headlines. Aside from another lackluster reaction to China’s stimulus announcement, investors remained on guard as they monitored the Israeli attacks, although officials said they would not target Iranian oil facilities.
The AUD/USD and NZD/USD saw heavy losses from the start and continued to decline through much of the day, as Chinese inflation reports released on Sunday came in below estimates. This was followed by a slowdown in the trade balance, indicating a slower-than-expected recovery in import and export activity.
Most major currencies were also weaker against the dollar throughout the day, with the exception of the British pound, which managed to trim its losses before the end of the New York session. The USD/CHF pair gained the most at 0.61% as the franc was likely affected by the downbeat release of the Swiss Producer Price Index.
Potential catalysts coming on the economic calendar:
- UK employment data 6:00 AM GMT
- German ZEW and Eurozone economic sentiment index at 9:00 AM GMT
- Canadian CPI numbers 12:30 pm GMT
- US Empire State Manufacturing Index 12:30 pm GMT
- FOMC Member Daly’s speech at 3:30 PM GMT
- FOMC Member Kugler’s speech at 5:00 PM GMT
- New Zealand quarterly consumer price index 9:45 PM GMT
There is no shortage of potential catalysts on the economic calendar today, as volatility could rise for the GBP, LONIE, USD and NZD!
Stay tuned for the release UK labor market figuresfollowed by Canada inflation report and US Empire State Manufacturing Index. after that, New Zealand has a quarterly CPI update upcoming, and may affect the Reserve Bank of New Zealand’s policy outlook.
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