Chinese indexes stabilised after a 2-day decline amid fresh optimism that official measures will be able to boost the recovery. Industrial profits improved for the first time in a year and the People’s Bank of China said it would step up policy adjustment and implement monetary policy in a “precise and forceful” manner to support the economy. Confidence in China’s recovery has been going up and down for so long now, that investor confidence could take lasting damage.

The omnipresent fear of the FOMC’s higher-for-longer policy stance (and indeed that of the ECB, BoE, and BoC) remains a major worry and was exacerbated after JPMorgan’s Dimon noted the potential for a 7% rate as a worst case scenario. Additionally, the threat of a US government shutdown this weekend and Moody’s warning of the potential negative impact on ratings rattled too and left buyers sidelined. Technicals have played a part as well with key levels in stocks, bonds, and the USD having been broken. The drop in September consumer confidence, manifested the anxieties and added to the selloff.

  • USDIndex continued to rally and firmed to its 2023 and 10-month high as it benefited from a haven bid, along with the relative outperformance of the US economy and rate differentials.
  • EURUSD and GBPUSD posted fresh lows at 1.0554 and 1.2134. The USDJPY is steady at 149.15.
  • Stocks – Hang Seng and CSI300 rose 0.7% and 0.4% respectively. Futures are mixed across Europe and slightly higher in the US, after Wall Street dragged down to the lowest levels since early June. The US100 tumbled -1.57% to 13,063.6. News that the FTC was suing Amazon helped knock big tech sharply lower. The US500 was down -1.47% to 4273 with 90% of the index and all sectors in the red. The US30 slid -1.14% to 33,618, slumping below its 200-day moving average.
  • Commodities – Oil rebounded to 90.80 as API reported a fall in inventories in Oklahoma.
  • Gold – broke 1900 and currently settled to 1895.50 as haven demand favors the Dollar rather than the precious metal. China jitters have flared up & expectations that central banks are sticking with the “higher for longer” messages have added to pressure on bullion.

Today: US Durable Goods.

Interesting Mover: Gold broke 1900, with next Support levels at 1885 & 1870.

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Andria Pichidi

Market Analyst

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