Market Report.
📉 In Japan, industrial production was downgraded to “flat recently” from “picking up”, and its recovery will need monitoring of overseas downturn risks. The Japanese government kept its assessment that the economy is recovering moderately, while reiterating the need to monitor global risks. The BOJ will meet this week and a Reuters poll expects no further rate hikes this year as a slim majority foresee the stance staying pat. Attention is needed on Japan’s policy response to risks given the recent election complicating the outlook for rates and fiscal support.
💱 The rise in the USDJPY reflects not only a strengthening of the dollar, but clearly a failure to keep the BoJ’s promise of further interest rate hikes.
💷 UK will decide the next interest rate cut by the Bank of England (BoE) on November 7. All economists polled by reuters expect the BoE to cut rates by 25bps to 4.75%, leaving room for easing given lower inflation, and around two-thirds see no change in December. Favorable inflation data has likely strengthened confidence in a sustainable trajectory to the 2% target. The upcoming UK budget is seen having minimal near-term inflation impact, potentially boosting demand initially and then supply. Inflation forecasts show a gradual decline to 2% in 2026, in line with the BoE’s gradual easing path versus peers’ steeper cuts. Economists’ end-2025 Bank Rate forecasts center around 3.50% but risks are assessed as skewed more toward the downside.
📉 The GBPUSD has fallen by more than 3.5% against the dollar in October.
💴 China is considering approving next week over 10 trillion yuan ($1.4 trillion) in extra debt issuance over the next few years to revive its fragile economy. The NPC Standing Committee meeting from Nov 4-8 may approve 6 trillion yuan in special sovereign bonds, partly to help local governments address off-balance sheet debt risks. Up to 4 trillion yuan in special-purpose bonds may also be approved over 5 years for idle land and property purchases. The timing of the meeting coincides with the US election, giving China flexibility to adjust the package based on the outcome. A stronger stimulus is expected if Trump wins as that could intensify economic headwinds from his trade policies. The planned stimulus falls short of 2008 levels but aims to enhance local government financing and alleviate property sector pressures.
📉 Sweden’s economy unexpectedly contracted 0.1% quarter-on-quarter in Q3 according to initial estimates, signaling the expected recovery has yet to start. This was below analysts’ forecast of 0.3% growth and means a technical recession if confirmed through revisions. The central bank has signaled it’s likely to cut its benchmark rate another 0.25% at both remaining 2024 meetings. Three previous cuts have done little to spur recovery as inflation remains below the 2% target, leaving scope for more action. Activity pickup remains elusive according to Statistics Sweden, increasing urgency for the Riksbank given downside risks to price stability.
🌍 This is the same disease that could be afflicting Germany and is spreading across Europe if rate cuts fail to revive the economy, mark our words.
Market View:
📊 Mini S&P 500 futures continue to trade with some weakness below 5900 points. The S&P 500 is currently trading at 5850 points. The Nasdaq 100, which reached 20,500 yesterday, is now retreating towards 20,380. In any case, this week’s earnings reports from the big tech companies will generate volatility in these two markets.
💹 The dollar index is currently pushing higher again, with the DXY approaching 104.50 as the EUR/USD loses 1.08. US 10 and 2 year bond returns continue to set new records, with the 10 year bond reaching 4.30%.
📈 In Europe, equities remain strong. The DAX 40 is trading close to all-time highs at 19,580 points at the moment. The Eurostoxx 50 still fails to consolidate above 5000 points and is currently trading at 4975 points.
🛢️ The spread detected yesterday between WTI crude oil and Brent crude oil is still active. Brent has not retreated and the WTI price continues to maintain its discount. Gold is again approaching record highs, currently trading at 2765 points. Bitcoin reaches $71,190, breaking the $69,000 barrier.
Geopolitics:
🌐 The EU accuses Russia of interfering in the election result, where the ‘Georgian Dream’ party has won the elections. The party is nationalist and rejects the EU. The EU has branded it pro-Russian. For its part, Russia has accused the EU of being behind the riots and destabilisation of the country in the wake of the results.
🇮🇱 Israel has voted to ban the UN aid agency UNRWA, the UN Relief and Works Agency for Palestine Refugees, amid accusations (by Israel) of involvement in terrorist activities against Israel. Tensions have risen between Israel and Palestinian aid organizations, as the Israeli PM said UNRWA workers must be held accountable for alleged terrorist links. The situation risks worsening humanitarian conditions in Palestinian refugee camps dependent on UNRWA assistance.
🌍 BRICS nations have jointly published a manifesto outlining their vision for reforming the global order. It calls for more equitable governance of multilateral organizations like the UN, WHO, IMF and World Bank. It emphasizes respect for sovereignty and opposition to unilateral sanctions as tools of coercion. BRICS aims to strengthen cooperation on issues like development, security, technology and finance through multilateral frameworks.
🗣️ Holocaust survivors are speaking out against Democrats for comparing Donald Trump to Hitler, calling it the “worst thing” they’ve heard and demanding an apology. Kamala Harris told CNN that Trump wants a military like Hitler’s that is loyal only to him, not the Constitution.
