Friday 4. November
INTERNATIONAL NEWS
Erdoğan said that in talks with Olaf Scholz, he felt a desire to find common ground with Putin
Although a month ago, the chancellor had "a completely different position."
Wishful thinking? — Apparently so, since the German government refuted Erdoğan's words.
Inflation in Turkey rose to 85.5% in October
As expected. The previous high was 83.45%.
The U.S. business activity index fell more than expected
The U.S. economy is still growing, but growth is slowing rapidly.
German Foreign Ministry urged its citizens to urgently leave Iran
Scholz flew to China to meet with Xi Jinping
Scholz said he was going to Beijing "precisely because business as usual is impossible in this situation."
"It is clear that if China changes, then our attitude toward China must change," – Scholz said, adding that "we will reduce unilateral dependence in the spirit of sensible diversification."
Under Angela Merkel, Germany has become doubly dependent on Russian raw materials and industrial supplies to China.
MARKET NEWS
The Bank of England expectedly raised the discount rate by 0.75% to 3%
But expects the rate to peak lower than previously thought.
This is a contradiction to the Fed.
BMW and Stellantis in Europe report better than expected
BMW stock is down more than 4% and STLA stock is down 3%.
Investors are beating the impending drop in demand.
Is IKEA a cool asset?
Revenue rose 7.7% to €27.578 billion. But profits halved to 719 million euros.
Morgan Stanley (MS) got the Fed's "call" right.
And it will start layoffs next week.
And Lyft will lay off 13% of its staff.
Apple and Amazon have only suspended hiring new employees. True, Amazon only suspended for the corporate structure, and still plans to hire next year. So the companies continue to deny the threat of a recession. Just like the Fed denied inflation in 2021.
Retailers are also signaling weakness to the labor market, hiring only 450,000 to 600,000 seasonal workers for the upcoming holiday season, up from 670,000 last year.
Including Amazon plans to hire 150,000, the same as last year.
UPS will hire 100,000, the same as last year.
Target will also hire 100k, the same as last year.
Walmart will hire 40k versus last year's 150k.
I wonder if this is indicative of WMT's decline in commerce compared to its competitors.
The White House gave an insider's view: the number of jobs will increase by 150k in the coming months.
True, it is not clear whether each month of the “coming months” or a cumulative total.
Either way, it is less than the market expects as of this Friday.
If it does happen – the bond market will get strong support. And the stock market reaction will be mixed. On the one hand, the Fed will get a reason to be softer. On the other hand, it will increase recession fears.
Canada cuts government bond issuance for fiscal year 2022-23 by $21 billion to $191 billion
The first common-sense thought in the world of government finance is not to burden future generations with government debt taken on at triple-dollar rates.
And it's a signal to the markets that peak Canadian government bond yields are near.
Financial markets
Investors tried to buy back stocks yesterday, but stock indices ended the day with an average drop of 1%.
MAGMA shares fell significantly again, confirming the end of their “fairy tale”. This time Apple (AAPL) did not hold back either, falling 4.2%.
Banks also fell sharply in value.
Industrial, oil, utilities, and commodities closed on the plus side.
The USD was up yesterday. I would like to note that the USD vs CHF pair renewed its local peak. That is, the CHF is getting cheaper than the euro.
The Swiss economy is beginning to crack. This time it may become a problem area. And not just because of the difficulties at Credit Suisse.
Nobody believes in the bankruptcy of the latter. But the market capitalization of CS now barely exceeds $10bn. And its problems are more likely not those of its shareholders, but those of depositors and everyone who has structural products issued by this bank in their hands.
The USD is slightly weaker this morning and US stock index futures are neutral.
In Asia, stocks in China are up noticeably – Hong Kong +6%, Shanghai +2%.
Japan is traditionally falling following the U.S. (-2%).
Investors are waiting for official US labor market data today.
Strong data will help the USD rise, but will be negative for stocks and bonds.
A weak data is the opposite.
However, the impact on stocks will be more difficult — as weak labor market is also a precursor to recession and lower business earnings.