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Daily Macro markets update 17/10/2024

Market Report.

๐Ÿ“Š Around 50 S&P 500 companies have reported so far with 79% beating estimates. Morgan Stanley shares rose 6.5% after topping Q3 expectations, while United Airlines gained 12.4% on better results and a strong Q4 forecast. September’s rally could imply further upside in October historically during election years.

๐Ÿ” A Chinese trade association has recommended reviewing Intel products for security risks, alleging flaws could threaten national security. CSAC accused Intel of potential surveillance, installing backdoors, and failing to address user-reported defects. It also took issue with Intel’s labor and export policies. China is a major market for Intel, accounting for 27.4% of revenue, so the pressure adds to challenges from poor earnings and US export restrictions. Similar to action on Micron last year, China may now direct carriers to stop buying Intel amid its “critical infrastructure” security concerns. Micron saw multi-billion dollar impacts after a ban on its products over alleged “network security issues.”

๐Ÿ  China will expand its “whitelist” of approved real estate projects and speed up bank lending for these to 4 trillion yuan by end-2024, up from 2.23 trillion yuan already approved. The Whitelist is a government strategy designed to inject liquidity into the struggling property market. All commercial housing projects are now eligible for the whitelist, aimed at ensuring completion of unfinished housing for buyers. Banks should deploy funds to developers “as soon as possible,” potentially releasing loans in full upfront rather than in tranches. Over 50 cities have rolled out policies but nationwide new home prices fell 23.6% in January-August, with average prices down 6.8% in August alone. Despite Beijing’s announcement of fresh steps to boost the industry, the CSI 300 real estate index plummeted by about 7%.

๐Ÿ“‰ The ECB is widely expected to cut interest rates by 25bps at today’s meeting, taking its deposit rate to 3.5%. Markets have priced in a follow-up 25bps cut in December to 3%, reflecting dovish signals from policymakers on slower inflation. Headline eurozone inflation cooled to 1.8% in September, below target, while core inflation hit a 2.5-year low of 2.7%. Sluggish Q3 growth data and the dovish Fed decision support expectations for back-to-back ECB cuts to support the slowing economy. Some warn the ECB risks overreacting and easing too much too fast, potentially requiring rate hikes in 2026-27 once growth and wages rebound.

๐Ÿ“‰ Japan’s exports fell 1.7% in September year-on-year, missing forecasts and the first decline in 10 months, while imports rose 2.1%. Weak demand in China and the US weighed on exports, as shipments to both countries declined led by soft auto sector demand. The yen’s recent rebound against the dollar also helped push down export values. China-bound shipments dropped 7.3% in September. The trade deficit widened to 294.3 billion yen, reflecting import growth outpacing exports. BOJ Governor Ueda has highlighted external risks from the global economy slowdown in recent dovish comments. While the BOJ is expected to hold rates steady in October, it will maintain its inflation forecast near 2% through early 2027, prioritizing risks.

Market View:

๐Ÿ“ˆ The good corporate results continue and the US stock markets resume their upward trajectory towards the highs. Mini S&P 500 futures are currently above 5900 points. The Nasdaq 100, meanwhile, is above 20,300 points and within striking distance of its highs in the area of 20,700 points.

๐Ÿ’ต The dollar continues to strengthen. The dollar index DXY has broken through the 103.50 barrier, which we targeted earlier in the week, but has subsequently retreated and is right at this border area. The euro/dollar continues to fall and has approached 1.0850, currently trading at 1.0865. The 2-year US bond remains at 3.95%, relatively high from the 3.50% levels it reached at the end of September.

๐Ÿ›ข๏ธ Crude oil has paused its declines on what appears to be preparations for an imminent Israeli attack on Iran. Brent crude is currently trading at $74.30 a barrel. Gold, on the other hand, is touching record highs and is currently trading above $2700 an ounce spot. Bitcoin continues to push higher and has broken above $68,000 in the last few hours, although it has returned to the $67,050 area at the moment.

Geopolitics:

๐Ÿ”Œ Google prepares 7 small nuclear reactors to ensure that its servers, which control millions of people’s data, can never be disconnected. Skynet?

๐Ÿ“ฐ Financial Times: โ€˜Israel faces air defence missile shortageโ€™.

๐Ÿ‡ฎ๐Ÿ‡ฑ Israeli officials told the New York Times: Israel will strike several locations in Iran, including missile and drone storage facilities, military bases, key government buildings and nuclear research laboratories.

๐Ÿ‡ฐ๐Ÿ‡ต North Korea is reportedly sending troops into the Ukrainian conflict to fight on the Russian side. In return, Russia will provide military assistance to North Korea if the country is attacked, as stipulated in the treaty between Moscow and Pyongyang, Russian Deputy Foreign Minister Andrey Rudenko said.

๐Ÿ‡บ๐Ÿ‡ฆ Mark Rutte, the new NATO Secretary, says that Ukraine’s accession to NATO is a long process, which will come in the future, but it is not the main point of Zelenski’s Victory Plan.

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