Market Report.
📊 Today will be an interesting day. We will have the Fed Chairman Powell’s speech and release of the US GDP data and the BoJ Monetary Policy Meeting Minutes.
🚀 Yesterday, The US technology sector returned to its best moments leading the gains. Micron Technology, the largest US maker of computer memory chips, is forecast to gain significantly after providing strong Q1 sales and profit guidance. Revenue is projected to be $8.7 billion compared to estimates of $8.32 billion, and profit is seen at $1.74 per share versus $1.52 expected. The strong outlook indicates Micron is well positioned in its competitive landscape versus Samsung and SK Hynix due to robust AI and data center demand for its memory products. Demand is also improving for PCs and smartphones, boosting the overall memory market.
🔔 Adriana Kugler, the governor of the Federal Reserve, stated that she “strongly supported” the US central bank’s rate reduction last week and that more rate reductions would be justified if inflation keeps declining as predicted.
🇬🇧 Fresh UK economic indicator data bolsters the argument that the Labour government’s warnings over a tough budget have backfired on sentiment. Surveys show confidence dropped sharply among employers about hiring in August and households expecting the economy to worsen over the next 3 months. This suggests the warnings overshadowed otherwise positive economic conditions like falling inflation and growth upgrades. The data indicates prematurely heightened consumer caution, which is probably the last thing the recovering economy needs.
🇪🇺 European stocks rose led by sectors exposed to China as the nation plans more fiscal spending to support its slowing economy. Also, today, after the ECB Economic Bulleting, the perception increases that the ECB will support markets without delay. A larger-than-expected fall in wages, depressing business surveys in the euro zone, and German mood data have given officials who prefer lower rates—or “doves” in the market language—more confidence to advocate for a decrease, the Reuters sources said. According to certain sources, there is a compromise option where rates are held in October but there is a clear indication that they will likely be lowered in December if the numbers don’t improve. However, this would go against the “meeting by meeting” strategy of the ECB. The choice is still up in the air, and several swing votes are still undecided, as the decision on October 17 is still three weeks away and crucial statistics, like September inflation, won’t be released until next week. Peter Kazimir of Slovakia has stated in the open that the ECB will “almost surely” have to wait until December. The disastrous PMI data we discussed a few days ago, together with the terrible iFo surveys raise fears of a negative Q3 that would put Germany into a technical economic recession.
💹 China is considering injecting up to 1 trillion yuan ($142 billion) in capital into its largest state banks through the issuance of new special sovereign bonds. This would increase the banks’ capacity to support the struggling economy, which has shown signs of slowing sharply in recent months. The capital injection for the big banks would be the first such move since the global financial crisis in 2008. News of the potential bank capital injection helped fuel a rebound in Chinese stocks, as investors bet more stimulus may be announced soon. China’s stock market has experienced another turbo-charged rally in the last 24 hours. Hong Kong’s HSI Hang Seng index has risen more than 10% so far this week and more than 17% since last week. Remember, the Chinese stock market rose more than 20% with the previous stimulus in May, and unfortunately deflated afterwards. Let’s hope that this time it holds.
Market View:
📈 Spectacular bullish start to today’s session. The S&P 500 futures finally broke through 5800 points, as we predicted yesterday, and now stands at 5823 points. Meanwhile, the Nasdaq-100 is breaking above the 20,000 point mark with a lot of strength and is currently at 20280 points. However, the Russell 2000 continues to retreat and stands at 2197 points.
💵 The dollar bounced up from 100.25 and has moved back towards the 101 point area, a range in which it has been fluctuating since last week after the rate cut announcement. Consequently, the EURUSD, which was at the gates of 1.12, has retreated to 1.1140 at the moment.
🇩🇪 In Europe, the Dax 40 has broken new highs despite the dark scenario coming from the German economy. Breaking the 19000 point barrier, it is now above 19115 points. More spectacular has been the opening of the Eurostoxx 50, which has opened with a bullish gap and has launched itself straight for the 5000 points, surpassing them briefly and retreating below that level in the last hours.
🏅 Gold continues to be on the upside, hitting record highs and trading at 2690 dollars per ounce. Bitcoin continues on its path towards 65000 dollars, currently trading at 64100 dollars.
🛢️ Crude oil is falling again, losing its intraday average of 55 and trading below 74 dollars a barrel. The reason for this is a possible peace agreement in the Middle East and the intentions declared a few hours ago to increase its market share, which could increase supply. In addition, we have maintained the position that the United States wants to keep crude oil low by using its reserves and those of Canada to contain inflation and to be able to continue cutting rates.
Geopolitics:
🌍 The US, Europe and Arab powers have proposed a three-week ceasefire between Israel and Hezbollah in Lebanon as part of efforts to de-escalate tensions and open negotiations. Senior US officials expect Israel and Lebanon to accept the deal in coming hours, hoping it can also help revive efforts for an Israel-Hamas ceasefire in Gaza. The proposal aims to prevent a major regional war from breaking out and allow tens of thousands of displaced Israelis to return home safely. While Israel has signaled openness, there is skepticism about the ceasefire’s longevity without a longer-term political settlement to address underlying issues.
🇺🇸 US Congress passed a stopgap funding bill to avert a shutdown and fund the government through December 20, after the House needed Democratic votes to pass it. Speaker Mike Johnson faces demands from his conference as well as presidential candidate Donald Trump over the lack of additional provisions like restricting noncitizen voting. Johnson had to balance keeping his right flank from rebellion while ensuring basic governing functions, a key concern for vulnerable members.
☢️ President Putin announced Russia will revise its nuclear doctrine to include a response to “aggression” by non-nuclear states supported by other nuclear powers. Under the updated doctrine, such joint attacks on Russia by a non-nuclear state and nuclear power would be considered a joint attack on Russia. Putin said Russia would consider nuclear weapons if it receives information of a massive air and space attack crossing Russia’s borders, including by aircraft, missiles and drones. Russia would also defend ally Belarus with nuclear weapons if necessary, according to Putin.
