Symax Fintech Daily Market Insights 01.11.23

The Fed will probably hold for a second straight meeting while keeping its tightening bias, given inflation data and officials’ comments. Ahead of the decision, investors will focus on the Treasury’s quarterly funding announcement. With deficit projections soaring, the plan may see most auction sizes increased. BB

Japan’s top currency official Masato Kanda said he’s on standby to intervene in the forex market if needed. The remarks strengthened the yen from close to its weakest levels of the year. Separately, the BOJ conducted an unscheduled bond buying operation as the benchmark yield inched toward 1% BB

US consumer confidence dropped to a five-month low in October, weighed down by dimmer views of business conditions and concerns about high prices. The Conference Board’s index fell to 102.6 from an upwardly revised 104.3 in September. A measure of expectations — which reflects consumers’ six-month outlook — eased to a five-month low. A gauge of expected inflation picked up. BB

The surprising resilience of American consumers is about to be tested over the coming months as rising delinquencies, growing debt payments and dwindling cash piles put pressure on households. Whether consumers pull back or power through is the biggest question facing Federal Reserve officials at their meeting this week. The central bank is expected to hold the target for its benchmark interest rate in a range of 5.25% to 5.5% Wednesday. Wall Street bond dealers expect the US Treasury to unveil another round of increases to its note and bond auctions at the quarterly refunding earlier that day. BB

Stocks have been doing pretty good so far this week—it’s the rest of October and the two months prior that have Wall Street moaning. Markets have notched their longest monthly slide since the onset of the pandemic in 2020. At the same time, the US dollar’s winning streak looks to be near an end. Strategists at Barclays, Morgan Stanley and National Australia Bank are cautioning that bets on the greenback are getting increasingly stretched, with the weakest appetite for new dollar positions in two months. And then there’s the bond market:  BB

Bank of Japan Governor Kazuo Ueda received a reminder of the pitfalls he faces in trying to tiptoe toward policy normalization without disrupting markets. The yen unexpectedly tumbled after the central bank loosened its grip on bond yields, as the move appeared to fall short of investors’ hopes for a clearer sign of progress toward policy tightening. Still, even if Tuesday’s step was a bit of a stumble, it brought Japan closer to a more conventional policy approach after decades of experimentation with quantitative easing, negative interest rates and yield curve control. BB

Workers in the US are getting record-breaking wage hikes this year thanks to strategic strikes and stunning contract wins. The result is a boost in middle-income wages and a shift in the balance of power between companies and their employees. Even before the United Auto Workers reached historic contract deals with carmakers, unions across the country had already won their members 6.6% raises on average in 2023 — the biggest bump in more than three decades, according to an analysis by Bloomberg Law. BB

The US dollar’s climbing fresh heights, and that’s only partly due to its surge against Japan’s currency after the central bank on Tuesday disappointed yen bulls and Tokyo bond bears. The Federal Reserve remains the outstanding hawk in the field. It has the highest cash rate across developed economies outside New Zealand, it has sounded more determined than most to keep borrowing costs elevated, and it’s busy trimming its balance sheet.

That’s widened the gap between US two-year yields and the average for the rest of the Group of Seven major nations to 178 basis points — a surge of 65 basis points since it touched a nadir in May. The dollar has tracked very closely with that spread during the current tightening cycle, and there’s little reason to expect that dynamic to fade any time soon. Even if the Fed doesn’t raise its cash rate target again it has signaled a determination to keep it elevated for a lengthy spell. The US economy is showing more resilience than its peers, and economists forecast it will outpace them over 2023 and 2024. BB

He may be the richest man in the world, but oh boy is Elon Musk having a bad time when it comes to his two marquee businesses. The first—the one that made the South African a household name—is Tesla, whose shares have plummeted. How far, do you ask? Well they’ve wiped out nearly one-fifth of their value in less than two weeks. The second—the company that arguably made Musk a divisive political figure—is Twitter (or X). A year after buying the troubled social media platform and firing thousands of its employees, his investment is worth less than half of what he paid.  BB

Israel has reportedly pushed multiple columns into northern Gaza, attacking what it says are Hamas strongholds and adding to a Palestinian death toll local authorities say exceeds 8,000. The invasion comes amid global calls for a ceasefire, warnings from Washington about civilian killings (the Biden administration has called for a humanitarian “pause”) and fears the conflict will trigger a terrorist attack in the US. Additionally, the risk that other militant groups and even Iran could join in, and thus draw in US forces, is seen as elevated. According to Iran’s state media, Foreign Minister Hossein Amir-Abdollahian met Hamas’s political leader Ismail Haniyeh in Qatar to discuss the war, their second meeting since Hamas launched the Oct. 7 assault that killed 1,400 Israelis. The Iranian diplomat has also visited Hezbollah’s leadership in Lebanon, according to state media. BB

China will set up a system to resolve local-government debt risks and will step up financial supervision, CCTV said. Up next: The PBOC will probably inject “ample” liquidity after rates surged, and investors will watch the October Caixin factory PMI as the official index unexpectedly contracted. Separately, Joe Biden and Xi Jinping are expected to meet in San Francisco this month. BB

EU Consumer prices rose 2.9% in October, down from the previous month’s 4.3% rate and marking a two-year low.

• Unexpectedly,third-quarter GDP fell 0.1%, missing estimates for stagnation.
• The data show that while the ECB’s 10 back-to-back rate hikes are helping to bring inflation toward the 2% goal, they’re also taking a toll.
• Individual country figureswere better: Italy stagnated, avoiding a recession, while France posted slight growth, with GDP ticking up 0.1%.
• The chancesof another ECB rate hike are “very low,” Bloomberg Economics says. The combination of a marked decline in inflation and weaker growth is probably “roughly what the ECB wants to see.” BB

A potential new round of EU sanctions designed to target the Kremlin for its war against Ukraine could affect up to €5 billion in trade. Goods that might be hit by export restrictions include diamonds, welding machines, chemicals, technologies for military use and software licenses, we’ve been told. The diamond ban would be contingent on a G-7 agreement to track and trace the precious stones across borders, which is expected to be finalized soon. The package of measures, which would be the 12th since Russia’s invasion, is also expected to add more than 100 individuals and four dozen entities to sanctions lists. While such penalties have failed to end the war, they have destroyed the standing of many wealthy Russians abroad. BB

The ECB would need to see a “very dramatic turnaround” in the region’s economic prospects to lower interest rates, Governing Council member Martins Kazaks told us yesterday after data showed euro-zone inflation plunged to its lowest level in more than two years. His colleague Francois Villeroy de Galhau said the central bank was fully justified in pressing pause on hikes last week. BB

Meta Platforms is set to be hit by a Europe-wide ban on leveraging the trove of personal data of Facebook and Instagram users to target them with ads — a move the social network giant says ignores its recent moves to give people more control. The curbs will extend temporary measures already in place in Norway. BB

High Charges | Apple could be forced to cut its App Store fees for developers after the Dutch Authority for Consumers & Markets said that its commissions violate the bloc’s rules. The Dutch regulator said Apple’s set-up unfairly targets companies offering subscription services, such as Match Group’s dating app Tinder, which has to pay high commission rates on in-app sales. BB

Bayer AG’s Monsanto unit was ordered by a California jury to pay $332 million to a former land surveyor who blamed his cancer on his use of the company’s controversial Roundup weedkiller – the third trial loss this month for the company. Jurors in state court in San Diego on Tuesday awarded Michael Dennis, 57, a total of $7 million in actual damages and $325 million in punitive damages over his claims 35 years of using Roundup on his lawns and gardens caused his non-Hodgkin’s lymphoma. BB