Daily Broad Market Recap – October 8, 2024

The lack of high-level data releases left room for major assets to continue pricing according to current market themes on Tuesday.

Can you guess which assets saw the most modifications?

Let’s discuss:

Titles:

• Reserve Bank of Australia meeting minutes Show that members prefer policies that are “sufficiently restrictive” to become more confident about inflation, but do not rule out interest rate changes
• Average cash income in Japan Slowed from 3.4% to 3.0% y/y as expected in August
• China NDRC ‘Very confident’ it will achieve its economic targets, adding 100 billion yuan to next year’s budget and another 100 billion yuan for major investment projects by the end of the year
• Germany industrial production Rose 2.9% m/m in August (0.8% expected, August reading revised down to -2.9%)
• NFIB US Small Business Optimism Index For September 2024: 91.5 (92.0 forecast; 91.2 previous)
• US trade deficit Shrank from $78.9 billion to $70.4 billion ($70.1 expected) in August as exports (+2.0%) outpaced imports (-0.9%)
• Canada’s trade deficit Wide from C$0.3 billion to C$1.1 billion (C$0.4 billion expected) in August as exports decline due to lower energy prices
• RealClearMarkets/TIPP Economic Optimism Index It jumped from 46.1 to 46.9 (47.2 expected) in October
• Voting member of the Federal Open Market Committee Rafael Bostic The labor market has slowed but not sluggish, he said, and remains “very focused” on inflation, which remains “very high.”
• Voting member of the Federal Open Market Committee Adriana Kugler He supports further interest rate cuts and favors shifting the Fed’s focus from lowering inflation to supporting the labor market
• Voting member of the Federal Open Market Committee Suzanne Collins “Further policy adjustments will likely be needed,” he said, but not on a predetermined path
• Voting member of the Federal Open Market Committee Philip Jefferson He favors a meeting-by-meet approach to interest rate cuts, and said the Fed’s balance of risks has changed as inflation declines and employment risks rise.
• API: US crude oil stocks Increased by 10.9 million barrels in the week ending October 4 (versus expectations for an increase of 1.95 million barrels, and a previous decrease of 1.5 million barrels)

Broad market price movement:

Markets opened muted, with focus on the Reserve Bank of Australia and China. China’s National Development and Reform Commission pledged to support the economy but did not provide many details. Meanwhile, the Reserve Bank of Australia’s meeting minutes revealed a preference for keeping policies tight until inflation shows clearer signs of slowing.

European stocks saw some losses after China’s ambiguous announcement, although this was tempered by lower concerns about Israel targeting Iranian oil facilities and more ECB members supporting a potential interest rate cut in October.

West Texas Intermediate crude fell in Asian trading after a disappointing China meeting and faced resistance at $78.00, falling further in the US session as tensions in the Middle East eased.

In the US, attention turned towards stabilizing Fed rate cut expectations following a strong non-farm payrolls report, with FOMC members favoring a slower pace of easing. Gold fell from $2,650, recorded a low of $2,605, and settled at $2,620. US 10-year bond yields rose to 4.05% before falling to 4.01%. US stocks, buoyed by technology gains and pre-earnings optimism, rose on Tuesday.

Forex market behavior: US dollar against major currencies:

Overlay of the US dollar against major currencies Chart by TradingView

The US dollar remained mostly flat as expectations for the next interest rate cuts by the Federal Reserve remained steady. AUD/USD saw some early gains thanks to hawkish Reserve Bank of Australia minutes but turned lower as China’s National Development and Reform Commission (NDRC) failed to provide details of planned support for the economy.

The US dollar fell briefly during early European trading after Federal Open Market Committee member Kogler backed further interest rate cuts, but it rebounded again, especially against safe-haven currencies such as the Swiss franc and the Japanese yen.

With no major US data, the dollar remained within its range for the rest of the US session. Volatility was most pronounced in 10-year US Treasury and stock yields, as Fed economic confidence and fading hopes for deeper interest rate cuts pushed bond yields lower and encouraged some risk-on.

Potential catalysts coming on the economic calendar:

• German trade balance at 6:00 am GMT
• Initial orders for machinery in Japan at 6:00 AM GMT
• Federal Open Market Committee member Bostic will speak at 12:00 noon GMT
• FOMC Member Logan will deliver a speech at 1:15 PM GMT
• Crude oil inventories released by the EIA at 2:00 PM GMT
• FOMC Member Goolsbee will deliver a speech at 12:00 PM GMT
• FOMC Member Jefferson will deliver a speech at 4:30 PM GMT
• FOMC meeting minutes at 6:00 PM GMT
• FOMC Member Collins will deliver a speech at 9:00 PM GMT
• Daly, a member of the Federal Open Market Committee, will speak at 10:00 pm GMT

The FOMC gang will be in the spotlight today as more voting members are scheduled to share their two cents. But all eyes will be on the FOMC minutes, which may shed more clues about the pace and scale of potential changes in Fed policy for the rest of the year.

Meanwhile, the German trade balance report may unsettle some points from major assets during the European session. Don’t even think about missing out on these potential triggers!

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