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Daily Macro markets update 04/10/2024

๐Ÿ“Š Market Report.

๐Ÿ“ˆ Today’s US employment data will be crucial in determining the next steps in monetary policy. Softer hiring and an increase in the jobless rate early this year were important motivations behind the Fedโ€™s decision to start its easing campaign with a hefty half-a-point decrease in rates last month.

๐Ÿ’ฌ Chicago Federal Reserve President Austan Goolsbee said yesterday, the Fed has largely brought inflation down to target, and will need to reduce interest rates “by a lot” over the next 12 months or risk over-cooling the economy and the job market. This week, Chair Jerome Powell reaffirmed that he would not want to see the labour market continue to deteriorate.

๐Ÿšข Retailers and manufacturers have been stocking up on goods for about two weeks in anticipation of the US longshoremen’s strike, Goolsbee reported yesterday. The main fears are that the strike could supply chain could lead to higher prices. Fortunately, we learned this morning that an agreement has been reached, and the strike has been suspended until mid-January.

โš“ The US dockworkers union ILA and terminal operators USMX agreed to extend their contract through mid-January, ending the three-day strike that paralyzed ports. Work will resume Friday morning and negotiations on a new long-term deal, including a 61.5% pay increase over six years, will continue. It also a potential political headache for the Biden administration and Kamala Harris’ campaign as they seek reelection.

๐Ÿ“‰ New orders for US manufactured goods unexpectedly fell 0.2% in August, versus forecasts for no change. Non-defense capital goods orders dropped 1.3% as initially estimated, and shipments fell 1.8% instead of 1.6%. The data signals weaker manufacturing activity and demand than expected in August. It raises questions about the sustainability of the industrial sector recovery and broader economic momentum.

๐Ÿ›ข๏ธ Crude oil futures are rising, with Brent crude already above $78 a barrel. Bloomberg recently published a map of possible targets that Israel would attack in retaliation for Iran’s attack. The main fear is that Iranian oil infrastructure will be attacked. This could affect oil prices, but, additionally, disaster could come with Iran’s next steps, as it controls the Strait of Hormuz and three strategic islands off the coast of the Emirates, and could militarily disrupt the flow of crude oil exports through the Persian Gulf, which constitutes 20% of the world’s crude oil trade.

๐ŸŽฅ Yesterday, Yemen’s Hutis forces released another video of an alleged attack on an oil tanker exploding off the coast of the Red Sea. A similar scenario could play out if the war spreads to the Persian Gulf.

๐ŸŒ€ The US needs low inflation, so it will probably restrain Israel from attacking pre-war infrastructures, as it knows that this will generate a global inflationary effect.

๐Ÿ’ท The Bank of England governor Andrew Bailey said the central bank could cut interest rates more aggressively if inflation pressures continue to weaken. Investors are pricing in a 97% chance of a 0.25 percentage point rate cut by the BoE at its November meeting, up from 90% previously. However, the BoE’s Decision Maker Panel survey and services data showed inflation pressures remain above normal levels in the UK economy. Wage growth expectations stood at a still-elevated 4.1% for the coming year, unchanged for the third survey. Bailey said he was encouraged by inflation proving less persistent than feared but warned of risks from geopolitical tensions in the Middle East.

๐Ÿ’ด BOJ Governor Ueda faces challenges to lifting rates as the yen rebounds and new PM Ishiba prefers loose monetary policy. Ishiba’s remarks that the economy isn’t ready for more hikes stunned markets and pushed the yen lower against the dollar. Many expect the BOJ will hold rates at its Oct 30-31 meeting due to the looming election. Ishiba’s comments reaffirmed the 2013 BOJ-govt statement focusing on growth, not an immediate policy impact. The BOJ may use overseas risks to argue for not hiking straight away and avoid abandoning its tightening bias.

๐Ÿ“ˆ Market View:

๐Ÿ“Š Markets are still cautiously awaiting US labour market data. They have barely recovered from Tuesday night’s declines due to Iran’s attack on Israel. Mini S&P 500 futures are trading at 5760 points and will have the main challenge to break above 5800 and consolidate. The Nasdaq 100 is showing a strong tone in today’s session, but has yet to regain 20,000 points.

๐Ÿ’ต The dollar index has reached 102 points with a strong rally, and is slightly retreating making support at 101.85. Consequently, the EUR/USD has fallen to 1.1030. The US bond is rallying, reaching yields above 3.7%.

๐Ÿ‡ช๐Ÿ‡บ The European market seems to stop its declines and is positive this session. The DAX 40 seems to have bounced off the 19,000 support level. Likewise, the Eurostoxx 50 has also made a base at 4900 points. A delicate balance ahead of the US employment data.

๐Ÿ† Gold remains sideways between $2700 an ounce and $2650. Bitcoin has made a base at $60,000 and is currently bouncing towards $61,300.

๐ŸŒ Geopolitics:

๐Ÿช– Ukraine opens a military recruitment office in Poland.

โš”๏ธ Israel has officially notified the UN that it plans an imminent military response to Iran’s attack, and that it will be very strong.

โš›๏ธ NATO-backed Ukrainian forces may have attacked the Kursk nuclear plant in Russia. In August, Moscow informed the International Atomic Energy Agency that Ukrainian forces were planning to attack the station.

๐Ÿšจ France calls on its citizens to leave Iran immediately. Reciprocally, Russia warns its citizens to leave Israel immediately.

๐Ÿ”ฅ It is reported that Israeli forces reportedly attacked a Russian base in Syria in the early hours of Thursday morning.

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