Stock market uncertainty ahead of corporate earnings and fundamental news
Stock market news
• Beijing's latest stimulus pledges were met with a mixed and volatile response on Monday, with some analysts blaming the mixed performance on the lack of a dollar value to the package, which may have mattered more to foreign investors than their Chinese counterparts. But the limited scope of the effort to boost domestic consumption remains a major concern for investors, especially after data on Sunday showed that China's consumer inflation unexpectedly eased in September while producer price deflation deepened.
• A mixed picture in Chinese markets on Monday set a negative tone for Europe, where EUROSTOXX 50 and FTSE futures fell around 0.1% each. European luxury stocks will be in focus given the focus on China: an index of 10 leading European luxury stocks has already risen almost 9% since September 24, when Beijing unveiled its most aggressive stimulus measures since the pandemic.
• A massive 50 basis point interest rate cut next month is now off the table given signs of resilience in the US economy, giving the dollar good support and allowing it to hold near a seven-week high against a basket of major currencies on Monday.
• In the morning, shares in China are slightly down. Energy futures are down 1-2% - they are strongly influenced by the psychological premium for the Middle East. Non-ferrous metal futures are down 1-2% - this is a reaction to the weakness of the Chinese economy.
• Two container shipping giants to avoid Red Sea due to Houthi attacks. AP Moller Maersk A/S and Hapag-Lloyd AG, which are starting a ship-sharing partnership, plan to start shipping partnerships south of Africa, assuming the Red Sea will remain dangerous until 2025.
• China tests investor patience as key briefing falls flat. China's long-awaited finance ministry briefing on Saturday lacked the rousing force investors had hoped for, suggesting the volatility that has gripped the market since a record global rally is likely to continue.
• Catastrophe bond issuance costs set to rise as equity asset managers react to Hurricane Milton fallout
• The predicted Halloween drop in consumption is the latest blow for heavily indebted retailers struggling with rising overhead costs and a trend among consumers to switch to cheaper goods.
• The monthly retail sales report will top the economic calendar this week as investors assess whether the economy is accelerating after September's surprisingly strong jobs report.
• In corporate news, results from Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) will round out the big banks' earnings, while earnings from United Airlines (UAL) and Netflix (NFLX) will be the week's headlines.
• Tesla unveiled its Cybercab and Robovan self-driving robotaxis. Investors were disappointed: TSLA shares fell 9% to $220. Uber (UBER) and Lyft (LYFT) shares fell nearly 10% on Friday. Investors were not impressed by Tesla's unveiling of its robotaxis, which could create new competition for app-based transportation platforms.
• Fitch: Hurricane Milton will cause losses to US insurers in the amount of $30-50 billion. Together with Hurricane Helene, which passed 2 weeks ago, and other hurricanes, total losses to insurance companies could exceed $100 billion in 2024.
• The Economist on oil prices: Despite the escalation in the Middle East, the oil market is less vulnerable due to excess supply.
In 2022, oil was in short supply, and demand for it was growing rapidly. That is why the Russian invasion raised prices to $120.
Now the world is awash in oil. Moreover, almost 60% of the world's oil now comes from countries that are not members of OPEC and its allies, compared with 44% in 2019.
• Foreign investors are buying more U.S. corporate bonds, a trend that is likely to continue. The Fed's easing of monetary policy is reducing the cost of hedging.
• BlackRock (BLK) attracted a record $221 billion in client funds last quarter, bringing its assets to a record $11.5 trillion. The company aims to become a one-stop shop for stocks, bonds and, increasingly, private equity.
• JPMorgan believes the U.S. economy has made a soft landing. The bank reported better-than-expected third-quarter results, a sign the economy is picking up steam as the Federal Reserve cut interest rates.
• Wells Fargo (WFC) reported third-quarter profit that beat analysts' expectations, as rising investment banking fees helped counter a decline in lending revenue due to falling interest rates.
• ByteDance lays off hundreds of TikTok staff as it moves to AI content moderation. TikTok lays off workers primarily in Malaysia - Reuters
• Trade tensions between China and the West have affected carmakers' investment decisions and long-term prospects, creating a level of uncertainty in the industry, TomTom's CEO said.
• Boeing to lay off 10% of its workforce - 17,000 people. Shares fell 1% in post-market trading.
Key events that could impact markets on Monday:
- Fed briefing by Kashkari and Waller
- France to resume auctions of 3-, 6-, 7- and 1-year government bonds
- Germany to resume auction of 1-year government bonds
Fundamental news
• China's deflation problem has worsened due to weak consumer prices. Consumer prices remain weak in September, and factory output prices continue to fall. China's industrial inflation in September showed a 2.8% y/y drop in prices, compared to -1.8% a month earlier and -2.6% forecast.
• The US Treasury is calling on the IMF and World Bank to take new steps to combat liquidity pressures. New ways to provide short-term liquidity support to low- and middle-income countries are needed to prevent a debt crisis.
• The U.S. producer price index was unchanged in September, held back by lower gasoline prices, indicating further progress toward reining in inflation. Expected U.S. inflation rose to 2.9% from 2.7%. But five-year inflation expectations fell to 3.0% from 3.1%, as expected.
• And U.S. consumer sentiment worsened in October on disappointment over high prices. Americans' outlook for the economy worsened slightly this month after two months of modest gains, according to the University of Michigan's consumer sentiment index released Friday. The index fell to 68.9 in October from 70.1 in September.
• China is making significant progress in rolling out its central bank digital currency (CBDC), with 180 million personal wallets registered as of July 2024 and total transaction volume reaching 7.3 trillion yuan ($1 trillion) in pilot regions.
• The former deputy chairman of the Central Bank of China was sentenced to life imprisonment (death penalty suspended for two years)
for bribes of $55 million. The official was involved in the digital yuan.
• The DPRK will put its offensive capabilities on the border with South Korea on full alert, the DPRK Foreign Ministry reports. The DPRK issues a final warning to South Korea and demands that drone flights be stopped.
• An anti-missile shield base will soon be operational in Poland. Russian missiles flying toward Poland will be shot down from there, says Polish Foreign Minister Sikorski. This will be an American base that will be launched to shoot down Iranian missiles flying toward the United States and NATO countries, but Sikorski said that he was negotiating “so that air defense missiles could also shoot down Russian missiles flying toward Poland.”
• Taiwan put on 'combat alert' after spotting Chinese aircraft carrier south of island on Sunday - Insider Paper China cracks down on officials for reading banned books, The Guardian reports.
• According to China Digital Times, the list of banned books in China includes Hillary Clinton's memoirs, Niccolò Machiavelli's "The Prince," Hannah Arendt's "History of Totalitarianism," and works on the country's politics and history that contradict the CCP's official position. Is book burning the next step?
• Serbia may join BRICS instead of joining the EU, Deputy Prime Minister Aleksandr Vulin said in an interview with Berliner Zeitung.
• Fifteen Caribbean countries could demand that Britain pay at least £206bn ($269bn) in reparations for damages from the slave trade. The issue will be considered on October 21, according to The Daily Mail.
• Germany's Social Democrats (SPD), led by Chancellor Olaf Scholz, presented a programme of tax breaks and investment support on Sunday in an effort to protect industrial jobs and attract voters in the general election due in September 2025.
• The Japanese movement Nihon Hidankyo received the Nobel Peace Prize. The activists were recognized for their fight against the use of nuclear weapons.
• Anti-corruption activists are outraged by the lack of criminal cases against 52 British firms that are circumventing oil sanctions against Russia - BBC. For almost two years now, the UK government has been checking companies suspected of complicity in circumventing oil sanctions imposed on Russia, but so far no one has been punished.
• US presidential candidate Donald Trump has threatened to leave NATO allies without protection from Russia if they do not meet the financial requirements of membership in the alliance. European NATO countries have been systematically disarming for many years, placing the main burden of military spending on the US. But the US state budget and national debt require urgent restrictions. Therefore, Trump's threats are logical.
• The annual informal meeting of the Araiolos Group, with the participation of the presidents of the EU countries, was held in Krakow, dedicated to the most important European and global problems - PAP. The theme of the meeting is strengthening transatlantic relations in the face of global challenges. In addition, the meeting will discuss the issue of EU enlargement by new countries: Ukraine, Moldova and Georgia, as well as the countries of the Western Balkans. It is attended by the presidents of 11 European countries: Poland, Italy, Bulgaria, Germany, Croatia, Greece, Estonia, Slovenia, Latvia, Hungary and Slovakia.
• Hungary signed a memorandum with Gazprom, which envisages an increase in gas transit via the Turkish Stream to a maximum of 8.5 billion cubic meters. “Whether you like it or not, the reality is that secure supplies of natural gas to our country are impossible without cooperation with Russia,” Szijjarto wrote.