Risk On Recovery Stall

Macroeconomic/ geopolitical developments

• On the data front, Monday saw the release of the US ISM Manufacturing PMI activity data, which was below expectations, and also showed falling price pressures (fuelling a risk on theme to start the week, month and quarter).

• Further easing inflation fears and adding to the risk on tone, the US job openings (JOLT) data for August fell to its lowest level in more than a year and by the most in nearly 2.5 years, by more than expected.
• The Reserve Bank of Australia (RBA) interest rate decision and statement on Tuesday brought a less than expected 0.25% rate hike (consensus was for 0.5%), which assisted in a “risk on” rally across global asset classes.

• This “pivot” by the RBA sparked market hopes of similar pivots by other central banks globally, and most notably, potentially by the Fed.
• However, US Federal Reserve speakers remained extremely hawkish in comments throughout last week, in the face of the pivot chatter.
• On Wednesday the OPEC+ group of oil exporters announced a 2 million barrels per day cut in target production, at the upper end of market expectations (sending the oil price higher and raising inflation fears).
• The US Employment report on Friday saw 263K jobs added last month, close to expectations, whilst the unemployment rate fell to match a five-decade low at 3.5%.
• This data release saw markets react with risk off moves across financial assets.

Global financial market developments

• The major US stock averages posted modest gains last week, though gave up much of the early weekly gains
• The S&P 500 added 5.6% in the first two sessions of October, posting its best two-day advance since 2020 and the third-best start to an October since 1930!

• Subsequent losses from Wednesday, however, saw much of these gains surrendered.
• European and Asian equity indices also posted weekly gains.
• US 10yr yields were lower then back higher, but closed at a higher yield for the week.

• US Dollar weakened the strengthened again, as DXY closed at a new multi-decade peak.
• GBPUSD advanced then failed lower after the prior week’s plunge and rebound from a record low.

• Gold rebounded further after hitting a multi-month low at the end of September.

• Oil surged before and then in the wake of the OPEC+ production cut decision, having hit a multi-month low at the end of September.

• Copper rallied and then sold off, retaining a bear tone.

Key this week

• Central Bank Watch: We get the FOMC Minutes on Wednesday.
• Macroeconomic data: Key data comes Thursday with the release of US CPI.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued