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Futures Try To Rebound From Biggest Market Rout In Over Two Years

Futures Try To Rebound From Biggest Market Rout In Over Two Years

US equity futures are trying to rebound after their biggest plunge in more…

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Futures Try To Rebound From Biggest Market Rout In Over Two Years

US equity futures are trying to rebound after their biggest plunge in more than two years, when the hotter than expected CPI print wiped out 4.3% or $1.5 trillion in market value from the S&P, and are up a modest 0.2% at 730am ET, erasing most of an earlier gain of 0.6%. Nasdaq 100 futures rose 0.7% after the tech-heavy gauge tumbled 5.5% in its worst day since March 2020.  Ahead of today's PPI print, the Bloomberg dollar index retreated after jumping the most in three months on Tuesday, while 10-year Treasurys ticked higher, hovering near a decade-peak. Oil was flat now that the traders consider $80 as a "Biden Bottom."

In premarket trading, heavyweight tech stocks posted modest gains a day after the Nasdaq 100 Index saw its biggest decline since March 2020. Apple (AAPL US) +1%, Microsoft (MSFT US) +2%. Other notable movers:

  • Starbucks (SBUX US) shares rise 2.3% in premarket trading after the coffee giant raised its three-year outlook for profit and sales at an annual presentation to investors. Analysts were mostly positive on the upgrades, with Jefferies finding the new three-year targets achievable.
  • Oracle (ORCL US) was initiated as hold at Berenberg as the broker sees balanced opportunities and risks for the software firm, while not expecting a major re-rating over the medium term.

“The equity rally over the past week was based more on sentiment than a material change in the underlying economic drivers,” UBS Global Wealth Management strategists led by Mark Haefele wrote in a note. “Tuesday’s selloff is a reminder that a sustained rally is likely to require clear evidence that inflation is on a downward trend.”

While the magnitude of Tuesday’s drop was indeed historic, and the intraday swing in spoos was one of the top 5 on record...

... the S&P 500 only reversed gains made in the previous four sessions that had been fueled by expectations of a softer reading on the US consumer price index. Investors have been waiting for any sign of peak inflation to come back to the equity market, while the previously discussed lack of a spike in the VIX shows that Tuesday’s selloff was more a recalibration of expectations than panic selling.

“Heading into the August CPI print, a number of traders thought they had information, and positioned very aggressively in the cash equity and derivatives markets,” said Christopher Harvey, head of equity strategy at Wells Fargo. “It turns out they did not have any real information on CPI (only a hunch based upon recent trends), and now they do not have as much AUM.”

The selling on Tuesday was most acute in the more speculative corners of the market that are particularly sensitive to higher interest rates. Technology falls into this category because the stock prices are based on expected future earnings, which are devalued when interest rates rise. Every single stock on the Nasdaq 100 was in the red on Tuesday, with the Index plunging the most since the world nearly ended in March 2020.

Tuesday's hot CPI data added to concern the Federal Reserve will need to push interest rates much higher to contain price pressures, with many now expecting a 4.50%-4.75% terminal rate (and in the case of Nomura, a 100bps rate hike) raising the risk of a recession. Now all eyes will be on the Fed decision next week, with swaps traders certain the central bank will raise interest rates three-quarters of a percentage point, and odds of a 100bps hike rising as high as 47% yesterday before easing.

“Multiple compression will continue as long as we have sticky inflation,” said Marija Veitmane, a senior strategist at State Street Global Markets. “Profits will crater. We still see a lot of downside on equities.” She added that central banks need to slow demand and cause pain in the economy to rein in inflation. The longer recession is delayed, the harder it will be, she said, which is true but politicians simply lack to will to enact a massive recession with millions of unemployed workers and is why the Fed will be ordered - soon enough - to reverse.

In Europe, the Stoxx 600 index slipped about 0.4%, though it pared a deeper drop as retailers gained, led by Inditex SA after the owner of the Zara fashion chain reported a jump in profit. Utilities were the among the worst-performing sectors as the European Commission considers plans to contain the energy crisis, which may include revenue caps. FTSE MIB outperforms peers, adding 0.7%, FTSE 100 lags, dropping 0.7%.

Earlier in the session, Asian stocks and bonds tumbled in the wake of the broad-based selloff on Wall Street while the yen strengthened after Japan warned of possible intervention in the currency market. Equity indexes in Japan, Hong Kong and Australia slumped, led by Nikkei which closed down 2.8%. Hang Seng and Shanghai Comp were also negative amid headwinds from an approaching typhoon and with the US reportedly in early talks on sanctions against China to deter it from invading Taiwan.

Japanese equities tumbled the most in three months, following a broad selloff in the US as inflation data fueled expectations for tighter Federal Reserve policy. The Topix fell 2% to close at 1,947.46, while the Nikkei declined 2.8% to 27,818.62. Both gauges slid by the most since June 13. Keyence Corp. contributed the most to the Topix loss, decreasing 5.1%. Out of 2,169 stocks in the index, 172 rose and 1,943 fell, while 54 were unchanged. “The content of the CPI data clearly showed that inflation is quite persistent and it’s difficult to see any clear outlook,” said Hitoshi Asaoka, a strategist at Asset Management One. “Wage inflation was seen in a wide range for the service-related sector and there are no signs that it will slow down.”  Inflation Surprise Puts Onus on Fed to Hit Brakes Even Harder Stocks pared losses in late morning trading before retreating again in the afternoon as the yen strengthened about 0.6% against the dollar. The Nikkei reported that the Bank of Japan conducted a so-called rate check in the currency market, a move considered a precursor for intervention.

In Australia, the S&P/ASX 200 index fell 2.6% to close at 6,828.60, the most decline since June 14, as Asian stocks and bonds tumbled in the wake of the broad-based selloff on Wall Street.  All sectors declined, with banks and mining shares weighing most.  In New Zealand, the S&P/NZX 50 index fell 0.9% to 11,658.04.

In FX, the yen pulled back from a slide toward the key 145 level versus the dollar after a Nikkei report that the Bank of Japan conducted a so-called rate check with traders to see the price of the currency against the greenback. The finance minister warned he wouldn’t rule out any response if curr ent trends continued. The country’s 10-year bond yield rose to 0.25%, the upper end of the central bank’s policy band. The Bloomberg dollar spot index fell 0.2%. NZD and AUD are the weakest performers in G-10 FX, JPY and GBP outperform.

  • Japan’s currency rose more than 1% to around the 143 level after falling to 144.96 against the dollar early in the Asian session after reports that the Bank of Japan conducted a rate check on forex with market participants, a move that’s seen as a precursor to intervening in the currency market. Benchmark 10- year bond yields rose to the upper end of the central bank’s designated range.
  • The euro briefly rose above parity against the dollar before paring gains. European bond yields were steady to a few bps higher
  • Swedish bonds underperformed European peers as markets were increasingly looking for a 100bps Riksbank rate hik next week after inflation rose to a three-decade high
  • The pound erased an early gain after UK headline inflation missed economist estimates, only to rebound. The UK yield curve steepened as short-dated bonds fell while longer maturities were little changed
  • UK inflation eased from its highest rate in four decades after petrol declined. The CPI rose 9.9% from a year ago last month, slower than the 10.1% pace in July. Economists expected a reading of 10%
  • The Australian dollar was steady amid losses in iron ore

“Many emerging markets are feeling the heat of the strong US dollar,” said Chi Lo, senior market strategist for Asia Pacific at BNP Paribas Asset Management, citing their debt burdens in greenbacks. “Only China can afford to defy this global rate-rise trend by keeping its easing policy stance.”

In rates, Treasuries fell across the curve, sending yields 2-3bps higher, and near the bottom of Tuesday’s range, a sharp bear-flattening move following hot August CPI and strong 30-year bond auction. Curve spreads are little changed with 2s10s and 5s30s spreads inverted.  US yields cheaper by 2bp-4bp across the curve with 10-year around 3.45%, underperforming bunds by ~1.5bp, gilts by ~2.5bp. The yield on short-end gilts eases about 3bps to 3.14%, while bunds 10-year yield climbs about 1bp to 1.73%.

In commodities, WTI trades within Tuesday’s range, adding 0.3% to near $87.54. Most base metals are in the red; LME nickel falls 1.7%, underperforming peers. LME lead outperforms, adding 0.6%. Spot gold is little changed at $1,704/oz.  The IEA cut its 2022 demand growth view by 110k BPD to 2.1mln BPD (prev. 2.21mln BPD); faltering Chinese economy, slowdown in OECD countries undercutting demand.

Bitcoin and Ethereum trade sideways just above 20k and 1.6k respectively, after crashing again on Tuesday.

To the day ahead now, and data releases include the UK CPI reading for August, Euro Area industrial production for July and US PPI for August. From central banks, we’ll hear from the ECB’s Villeroy. And in politics, European Commission President Von der Leyen will deliver her State of the Union address.

Market Snapshot

  • S&P 500 futures up 0.6% to 3,955.50
  • MXAP down 1.9% to 152.39
  • MXAPJ down 2.2% to 500.13
  • Nikkei down 2.8% to 27,818.62
  • Topix down 2.0% to 1,947.46
  • Hang Seng Index down 2.5% to 18,847.10
  • Shanghai Composite down 0.8% to 3,237.54
  • Sensex down 0.2% to 60,447.02
  • Australia S&P/ASX 200 down 2.6% to 6,828.62
  • Kospi down 1.6% to 2,411.42
  • STOXX Europe 600 down 0.2% to 420.19
  • German 10Y yield little changed at 1.72%
  • Euro up 0.3% to $1.0001
  • Gold spot up 0.2% to $1,704.99
  • U.S. Dollar Index down 0.33% to 109.46

Top Overnight News from Bloomberg

  • Jeffrey Gundlach of DoubleLine Capital is worried the Fed will choke off economic growth by raising interest rates too fast. Former Treasury Secretary Larry Summers is among those saying the central bank needs to hike even faster to restore its credibility
  • The EU’s executive arm plans to recommend cutting funding for Prime Minister Viktor Orban’s administration on concerns about widespread graft in Hungary, according to senior EU officials
  • French Finance Minister Bruno Le Maire raised this year’s economic-growth forecast to 2.7% from 2.5% as consumption and corporate investment hold up, and job creation remains dynamic
  • France’s power-grid operator expects to ask households, businesses and local governments to reduce energy consumption several times over the next six months, to avoid rotating power cuts as the country grapples with a regional energy crisis

A more detailed look at global markets courtesy of Newsquawk

Asian stocks declined following the bloodbath on Wall St where the S&P 500 had its worst day since June 2020, the DJIA slumped by nearly 1,300 points, while the Nasdaq 100 led the declines with all constituents in the red after hot US inflation data spurred more hawkish Fed rate pricing. ASX 200 was pressured with losses in all sectors and underperformance in real estate after ASIC moved to stop investment in two major property funds. Nikkei 225 fell below 28k amid notable losses in the tech industry and with stronger than expected Machinery Orders doing little to inspire a turnaround. Hang Seng and Shanghai Comp were also negative amid headwinds from an approaching typhoon and with the US reportedly in early talks on sanctions against China to deter it from invading Taiwan.

Top Asian News

  • PBoC set USD/CNY mid-point at 6.9116 vs exp. 6.9003 (prev. 6.8928).
  • US congressional panel was told by experts that the US ban on sales by Nvidia to Chinese clients will slow Beijing’s efforts to build a facial recognition surveillance network and further restrictions on high-tech product sales should be imposed, according to SCMP.
  • Hong Kong is to tighten rules regarding issuing provisional vaccine passes to travellers, according to SCMP.
  • Japanese Finance Minister Suzuki said FX intervention is among the options and FX moves are apparently rapid, while he added they are very concerned about sharp yen weakening and will take necessary steps if such moves persist.
  • BoJ reportedly conducted a rate check on FX in apparent preparation for currency intervention, according to Nikkei. JiJi suggested the rate check was conducted with USD/JPY at 144.90. Note, officials have since refrained from confirming the rate check.
  • Japanese Finance Minister Suzuki said recent JPY moves have been quite sharp; reiterates will not rule out any options when asked about intervention, via Reuters.
  • Indian Trade Body executive said that the State Bank of India is ready for INR trade with Russia; Indian trade body executive expects exports from the country to pick up in October.
  • Indian trade body executive sees a singing of India-UK Free Trade Agreement by the end of October; India-Australia trade pact likely by November.

European bourses trade mostly lower but off worst levels, but the sentiment remains dampened. European sectors are mostly lower with no overarching theme. Stateside, US equity futures consolidated overnight after yesterday’s detrimental losses, with a relatively broad-based gains performance seen across the main futures contract in the early European hours

Top European News

  • Queen’s Coffin to Lie in State as Mourners Face 30-Hour Wait
  • EU Aims to Boost Ukraine’s Economy With Single Market Access
  • EU Starts Talks With Norway to Try to Cut the Price of Gas
  • Auto Trader Downgraded by Morgan Stanley; Schibsted Raised
  • Russia Earns Less Despite Higher Oil Flows in August, IEA Says

FX

  • The JPY is in focus and stands as the outperformer amid overnight reports of a rate check conducted by the BoJ, whilst verbal intervention continued from Japanese officials.
  • DXY is subsequently pressured but holds onto a 109.00 handle whilst EUR/USD trades on either side of parity
  • The Pound bounced firmly in spite of softer than expected UK inflation data, albeit after an initial decline and following very heavy losses on Tuesday.

Fixed Income

  • Bunds are regaining a firmer grasp of the 143.00 handle between 143.76-142.83 parameters following a strong 2044 auction.
  • Gilts and the 10 year T-note have also bounced from deeper intraday lows in consolidative trade.

Commodities

  • WTI and Brent are relatively contained after the front month futures settled lower yesterday.
  • US Private Inventory Data (bbls): Crude +6.0mln (exp. +0.8mln), Cushing +0.1mln, Gasoline -3.2mln (exp. -0.9mln), Distillates +1.8mln (exp. +0.6mln).
  • IEA OMR: Cut its 2022 demand growth view by 110k BPD to 2.1mln BPD (prev. 2.21mln BPD); faltering Chinese economy, slowdown in OECD countries undercutting demand
  • Spot gold holds onto the USD 1,700/oz mark after dipping to a USD 1,696.10/oz low yesterday, with upside levels including the10, 21, and 50 DMAs
  • Base metals are relatively flat awaiting the next catalyst.

US Event Calendar

  • 07:00: Sept. MBA Mortgage Applications -1.2%, prior -0.8%
  • 08:30: Aug. PPI Final Demand MoM, est. -0.1%, prior -0.5%; YoY, est. 8.8%, prior 9.8%
  • 08:30: Aug. PPI Ex Food and Energy MoM, est. 0.3%, prior 0.2%; YoY, est. 7.0%, prior 7.6%
  • 08:30: Aug. PPI Ex Food, Energy, Trade MoM, est. 0.2%, prior 0.2%; YoY, est. 5.5%, prior 5.8%

DB's Jim Reid concludes the overnight wrap

After a recent run of optimism that the US economy might achieve a soft landing, and that upsides on inflation were now behind us, yesterday saw that narrative take a significant blow on the back of another stronger-than-expected CPI release. Both the monthly headline and core CPI prints surprised on the upside, which in turn led investors to ratchet up the amount of rate hikes they’re pricing in for the coming months. Indeed, futures are not only pricing in another 75bps hike from the Fed next week, but they are now pricing in a meaningful probability of a 100bp hike, while also viewing the prospect of a fourth consecutive 75bps move in November as an increasingly likely outcome.

The material tightening of policy expectations sucked the life out of equities, making it one of the worst single-day performances since the onset of the pandemic with the S&P 500 (-4.32%) and the NASDAQ (-5.16%) each having their worst day since June 2020.

In terms of the details of that CPI print, the monthly headline number was actually pretty subdued again at +0.1%. However, that was two-tenths above the -0.1% reading that had been anticipated by the consensus, and meant that the year-on-year measure only drifted down to +8.3% (vs. +8.1% expected). Furthermore, the bulk of that downward pressure came from energy once again (-5.0% on the month), and if you look at the core CPI measure that excludes the volatile food and energy components, that was still rising at +0.6% on the month (vs. +0.3% expected), which is well above rates consistent with the Fed’s target. In fact on a year-on-year basis, core CPI rose to its fastest pace since March at +6.3% (vs. +6.1% expected).

Looking at some alternative measures, the details of the report are even less flattering than the headline +0.1% number. For instance, the Cleveland Fed’s trimmed mean (which excludes the biggest price outliers in the consumer basket) saw a +0.6% gain on the month, which shows that inflation is still broad-based, and that the headline number is being dragged down by outliers. On top of that, the “stickier” components of the consumer price basket were the ones seeing the more rapid increases, with the Atlanta Fed’s Sticky CPI series gaining +0.6% on the month, which contrasts with the -0.9% decline in the Flexible CPI series. So ultimately there was a sense following the report that many market participants may have got ahead of themselves after the previous month’s downside inflation surprise, which after all was the biggest downside surprise relative to consensus in over five years. As I outlined in my CoTD yesterday (link here) that came out before the data, it’s easy to conclude that inflation has peaked due to a collapse in many supply side factors of late but the problem is that we think most of the inflation is now demand led and until the lagged effect of Fed hikes bites inflation will be sticky. The good news about demand side inflation is that the Fed have a fair amount of power over it. The bad news is that it might require notably higher interest rates still. If you’re not on the Chart of the Day (CoTD) and want to be, please email jim-reid.thematicresearch@db.com.

Given the latest inflation data, investors moved to price in a much more aggressive pace of rate hikes from the Fed over the coming months, with a number of new milestones reached. First, investors are now fully pricing in a 75bps move at next week’s meeting, with a non-negligible chance (c.34%) of 100bps as well. Second, a 75bps hike is now seen as more likely than not for the November meeting too. And third, the implied rate by the December meeting now exceeds 4% for the first time, which is a far cry from the 0.82% rate expected when 2022 began. Markets are also expecting a more hawkish Fed into 2023 as well, with the December 2023 rate moving up +18.7bps to 3.82%.

Those expectations of a more hawkish Fed led to a major selloff for Treasuries, with the 2yr yield soaring +18.5bps to a post-2007 high of 3.76%, whilst the 10yr yield rose +5.0bps to 3.41%. That was driven by higher real yields, and at one point the 10yr real yield even exceeded 1% in trading, before falling back to close at 0.96%. The entire yield curve flattened given the higher probability of a harder landing, with 2s10s ending the day at -34.8bps and 5s30s falling -15.5bps to finish inverted (-10.3bps) for the first time since the start of the month. In Asia, US 10yr USTs are another +1.2bps higher with 2yrs +0.5bps. It was a similar story on the other side of the Atlantic too, as the CPI report led investors to expect more rate hikes from the ECB as well, with 129bps of further hikes priced in for the remaining two meetings this year up from 118bps at the start of play. In turn, yields on 10yr bunds (+7.5bps), OATs (+6.4bps) and BTPs (+3.3bps) all moved higher.

As previewed at the top, the sharp tightening in rates led to the worst day in a while for US equities.The S&P 500 experienced a rout that saw it shed -4.33% on the day, its worst day since June 2020, where just 5 companies in the entire index moved higher on the day. Tech stocks were particularly impacted, with the NASDAQ down -5.16%, whilst the FANG+ index of megacap tech stocks fell by a massive -6.56% (worse day since September 2020) given its particular sensitivity to raising discount rates. Bear in mind that up until the CPI release, futures had actually been pointing to gains in the US, following which there was a sharp turnaround in the other direction. That was evident in Europe too, where the STOXX 600 swung from an intraday high of +0.64% just before the release before closing -1.55% lower.

In terms of yesterday’s other news, the UK unemployment rate fell to 3.6% in the three months to July (vs. 3.8% expected), marking its lowest rate since 1974. The number of payrolled employees in August was also up by +71k (vs. 60k expected), and growth in average total pay was up +5.5% in the three months to July (vs. 5.4% expected).So cumulatively the data is pointing towards further hikes from the BoE, and the hike priced in for next week’s meeting went up by +2.6bps yesterday to 68.7bps. Gilts underperformed their counterparts elsewhere in Europe, and the 10yr yield rose +9.0bps to a fresh high for the decade at 3.17%.

Elsewhere, Brent crude oil prices rebounded more than +2.5% intraday (to close down -0.88%) following reports that the United States was considering purchasing crude at $80/bbl to rebuild the Strategic Petroleum Reserve. However, that price level had been floated a few months back, and any repurchases will likely take place over the course of a few years, and wouldn’t begin in the near-term. So those headlines probably are not as incrementally important as yesterday’s intraday price action may suggest.

Elsewhere, the ever-looming geopolitical tail risks provided another nugget yesterday, with Reuters reporting the US was in early discussions of considering sanctions against China to deter an invasion of Taiwan, with Taiwan lobbying EU to take similar steps. Early days in this story, but unquestionably a potential flashpoint to keep an eye on. Regular readers will know we think a bi-polar world with sanctions and trade barriers between the two blocks is a reasonable medium-term scenario.

The strong inflation print has also shaken stocks across Asia with the Hang Seng (-2.58%) leading losses followed by the Nikkei (-2.18%), Kospi (-1.68%), the CSI (-1.24%) and the Shanghai Composite (-1.02%).

S&P 500 and NASDAQ 100 futures are trading +0.20% and +0.13% higher respectively. Stoxx futures are down c.-0.75% as the main index closed before the last leg of the US sell-off.

Elsewhere, China extended its currency defense as the People’s Bank of China (PBOC) set the daily reference rate for the yuan at the strongest bias on record at 6.9116 per US dollar, 598 pips stronger than the Bloomberg average estimate. Separately, yields on 10-yr Japanese government bonds (JGB) advanced to 0.25% for the first time since June, touching the upper end of the BOJ’s target range. This story has gone quiet in recent months so it'll be interesting if the risk of the BoJ YCC policy going starts to bubble again. Indeed, the Japanese yen is hovering close to its 24-year low at 144.43 against the US dollar after the dollar jumped +1.4% on the surprisingly strong US inflation report.

There wasn’t much in the way of other data yesterday, but the German ZEW survey for September came in beneath expectations, with the current situation component falling to -60.5 (vs. -52.1 expected), and the expectations component down to -61.9 (vs. -59.5 expected). That’s the lowest reading for the expectations component since October 2008 at the depths of the financial crisis.

To the day ahead now, and data releases include the UK CPI reading for August, Euro Area industrial production for July and US PPI for August. From central banks, we’ll hear from the ECB’s Villeroy. And in politics, European Commission President Von der Leyen will deliver her State of the Union address.

Tyler Durden Wed, 09/14/2022 - 07:54

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What Is the New York Stock Exchange and What Does It Do?

What Is the New York Stock Exchange in Simple Terms?With more than 2 billion shares trading hands each day, the New York Stock Exchange (NYSE) is the world’s…

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The New York Stock Exchange is located on Wall Street in New York City.

wdstock from Getty Images Signature; Canva

What Is the New York Stock Exchange in Simple Terms?

With more than 2 billion shares trading hands each day, the New York Stock Exchange (NYSE) is the world’s largest exchange for securities trading, which is the buying and selling of debt or equity, such as stocks and bonds. The NYSE is located in a historic building in the heart of New York City’s financial district at 11 Wall Street.

The NYSE was known for centuries as the "Big Board" because brokers would use an auction-based system to buy or sell shares of stock from its trading floor, and share prices were updated throughout the day on a large board that traders could see from the trading pit. 

A ringing bell signaled the beginning and the end of the trading day. The opening bell signaled the start of the trading day at 9:30 AM, and the closing bell happened at 4:00 PM, marking the end of the trading day. Trades at the NYSE took place on an actual trading floor up until the onset of the COVID-19 pandemic, when everything moved online; floor trading resumed for vaccinated brokers in May 2021.

Is the NYSE a Stock Exchange or a Stock Index?

The NYSE was a privately-owned exchange, or a place for trading, from its inception in the late 1700s until 2006, when it was bought by Intercontinental Exchange, which took shares public. Its ticker symbol is ICE.

However, since the New York Stock Exchange is the world’s largest trading exchange, with over 80% of the S&P 500 companies trading on it, the NYSE Composite, made up of 2,000 stocks listed on the NYSE, has come to be known as a benchmark stock market index. Glancing at how it’s doing gives investors a sense of the overall health of the financial markets. An exchange-traded fund (ETF) based on the NYSE Composite was introduced in 2004; its ticker symbol is NYA.

In addition, the New York Stock Exchange owns a smaller stock exchange, the American Stock Exchange, which it acquired in 2008. Now known as the NYSE American, it is where small-cap companies trade on lower volumes.

What Does the New York Stock Exchange Do? Who Works There? How Does It Make Money?

The NYSE has two purposes:

1. It facilitates buy-and-sell trades of securities.

2. It enables companies to raise capital by selling stock.

The NYSE was originally founded as a space exclusively for securities trading under the Buttonwood agreement in 1792. Prior to that, traders had to sell securities alongside commodities like coffee and tobacco and often had to do so outside, in rain and snow, which is how they got the nickname curbstone brokers.

The Buttonwood Agreement also established regulations and set standard commission fees that brokers could charge clients. Now, with a roof above their heads, traders could call out buy and sell orders from the trading floor; those transactions would be recorded, which provided a level of transparency as well as liquidity that before had not been possible. It was the beginning of efficient market operations as we know them.

Today, computers do most of the buying and selling at the NYSE, although there are still several hundred brokers and traders who shout their orders from the trading pit each day. The scene plays host to dozens of media outlets as well as executives and celebrities who ring the opening bell.

The NYSE makes money through revenues from transaction fees it charges to brokerages, asset-management companies, and market makers. In addition, all members of the NYSE are required to pay yearly membership fees as well as an additional fee to apply.

What Are the New York Stock Exchange’s Hours? Can I visit the NYSE?

The NYSE operates Monday–Friday from 9:30 AM–4:00 PM eastern time. It is closed in observance of the following holidays; when the holiday falls on a Saturday, it closes the Friday before.

  • New Year’s Day
  • Martin Luther King, Jr. Day
  • Washington’s Birthday
  • Good Friday
  • Memorial Day
  • Juneteenth
  • Independence Day
  • Labor Day
  • Thanksgiving Day
  • Christmas Day

The NYSE was open for tours up until the September 11, 2001 attacks; it is no longer accessible to the public.

Which Companies Are Listed in the New York Stock Exchange? How Does a Company Get Listed?

The NYSE lists over 2,000 U.S. and international stocks—for the current lineup, check the directory on its website.

What Is the Difference Between the NYSE and the Nasdaq?

The NYSE and the Nasdaq are both stock exchanges, but the NYSE is much larger. It has a market capitalization of $26 trillion as of 2021, compared with the Nasdaq, which has a market cap of $19 trillion.

In addition, there are several other key differences:

Differences between NYSE and Nasdaq Exchanges

The NYSE sets prices through an auction market, which means that shares are bought directly by buyers from sellers, and share prices are set based on the highest price a bidder is willing to pay and the lowest price a seller will accept.

The Nasdaq uses a dealer market, which means that buyers and sellers do not interact directly; rather, the trades are handled by a dealer, often a larger brokerage known as a market maker, which maintains inventories of stocks and facilitates trades from its own accounts.

Where Is the New York Stock Exchange at Right Now?

For a live feed of NYSE prices, check out its website.

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Volatility Snaps Near-Term Conviction

Overview:  The markets seem to lack conviction today. Stocks in the Asian Pacific region advanced. Europe’s Stoxx 600 is giving up its earlier advance,…

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Overview:  The markets seem to lack conviction today. Stocks in the Asian Pacific region advanced. Europe’s Stoxx 600 is giving up its earlier advance, and US futures are heavier. Australian and New Zealand bonds played catch-up after the rise in the US and Europe yesterday. Their benchmark yield rose 14 bp and 10 bp, respectively. The US 10-year Treasury yield is firm near 3.77%, while European bonds are narrowly mixed, though Gilts are under pressure. The 10-year yield is up 10 bp to 4.12%. The dollar is mixed with the dollar-bloc currencies, sterling and the Norwegian krone on the weaker side. Those G10 currencies like the euro, Swedish krona, and Swiss franc are barely holding on to gains. Gold snapped a six-day rally yesterday and is a little lower today. It still looks poised to retest $1700. December WTI is little changed against rallying more than 10% in the first three sessions this week. It is near $86.70 after settling last week slightly below $78.75. US natgas is rising for the third consecutive session. Its 1.4% gain follows a 7% increase in the past two sessions. Europe’s natgas benchmark is off 3.1% to offset a good part of yesterday’s 3.5% gain. Iron ore rose for the third consecutive session, but it is flat on the week. December copper is also rising for a third session, but it is up about 3.5% this week. December wheat is extending its slide into a fourth session. It is off about 3% this week after rising 7% over the past two weeks.  

Asia Pacific

Australia reported a smaller than expected trade surplus for August. Exports rose 3% after a 10% fall in July, while imports rose 4% after a 0.5% increase previously. Economists in Blomberg's survey had expected a small decline in imports. The surplus of A$8.3 bln missed the median forecast for a $10 bln surplus and was smaller than July’s nearly A$9 bln surplus. Still, in the first eight months of the year, the average monthly surplus was A$11.1 bln compared with A$10.2 bln in the same period last year. In Jan-Aug period in 2019, the average monthly trade surplus was A$5.7 bln.

Japan weekly portfolio flow data showed that into the end of the fiscal half year, Japanese investors continued to divest foreign bonds. Japanese investors some JPY886 bln of foreign bonds. This bring brings the four-week total JPY3.3 trillion (~$23 bln). Japanese investors bought foreign equities for the third consecutive week for a cumulative total of JPY876 bln (~$6.1 bln). Meanwhile, foreign investors continued to be significant sellers of Japanese bonds. They sold JPY1.56 trillion in the last week of September to bring the four-week total to a whopping JPY6.4 trillion (~$45 bln). This appears to be a record outflow. Foreign investors were net sellers of Japanese stocks for the sixth consecutive week. Over the past four-weeks, they sold JPY2.6 trillion ($1.8 bln), the most in six months.

The US dollar recovered from yesterday's seven-day low against the yen (~JPY143.55) to JPY144.70. It remains firm, though in a narrow range and has not traded much below JPY144.40. Market participants continue to seem uncomfortable buying dollars above JPY145.00. The Australian dollar tried to extended yesterday's recovery off the $0.6415 area and made it $0.6540 before being turned lower. It traded to around $0.6480 in the European morning and could slip a little more. There are options for almost A$600 mln at $0.6475 that expire today. We assume they have been neutralized. The intraday momentum is oversold, suggesting a better tone is possible in North America. The base around $0.6400 looks firm. China's mainland markets remain closed for the Golden Week holiday. The US dollar fell to almost CNH7.0125 yesterday and has steadied today, remaining within in yesterday's range. Recall that it settled September (the last day mainland markets were open) near CNH7.1420. 

Europe

German factory goods fell 2.4% in August, more than three-times more than expected. On the other hand, the July series was revised sharply higher (+1.9% from -1.1%) on the back of large aerospace orders, according to the government, which looked like foreign orders. Domestic orders fell 3.4% in August after dropping 3.7% in July. Foreign orders fell 1.7% in August but rose 6.0% in July. Orders from the eurozone rose 4.5% in July and fell 3.8% in August. Separately, the construction PMI fell to 41.8 from 42.6. It has not been above the 50 boom/bust level since March. Tomorrow, Germany reports August retail sales (median in the Bloomberg survey calls for a 1.2% decline) and industrial output (expected to fall by 0.5% after a 0.3% drop in July. Note that the eurozone's aggregate retail sales were reported today. While the 0.3% decline was expected July's 0.3% gain was revised to a 0.4% decline.

A week ago, S&P lowered the outlook of its AA UK rating. However, this seemed to be catch-up as both Fitch and Moody's had the credit as the equivalent of AA-. Today, Fitch puts cut its outlook to negative, reflected the unfunded tax cuts. We await today's report, but on Tuesday and Wednesday the. BOE did not buy any bonds. This emergency program to address what had appeared as a threat to financial stability is to conclude at the end of next week. The concern is what is going to happen afterwards. The BOE's program aimed at the long-end of the curve. The UK's 30-year bond yield was around 3.5% in the middle of September. The yield jumped to almost 5.0% on September 27 as the market reeled from the mini-budget and the forced liquidation. The BOE stepped in and at the end of last week, the 30-year Gilt yield was about 3.82%. However, it has risen each session this week and now stands a little above 4.25%. Many expect the BOE to address this may either a new permanent facility and/or some other measures, including, perhaps, delaying further when it intends to sell bonds that it bought during the pandemic.

Parity capped the euro over the past two sessions. The euro was sold to $0.9835 yesterday and has recovered to trade in about a quarter-cent range on both sides of $0.9900. While the range can extend in North America, we suspect that the proximity of tomorrow's US jobs data is conducive to a consolidative tone. The $0.9950 area may offer a nearby cap. Similarly, sterling encountered strong resistance near $1.15 and was sold to almost $1.1225 yesterday. It recovered to a bit more than $1.1350 yesterday in North America and extended it a bit further today (~$1.1385). It retreated a cent by early European trading and found support near $1.1280. The intrasession momentum indicator is turning ahead of the North American open.

America

Yesterday's data prompted the Atlanta Fed's GDPNow to lift its Q3 estimate to 2.7%, the highest so far in the quarterly cycle. The strong dollar is expected to hurt US exports, but real (adjusted for inflation) have been strong. In August, real exports rose by about $2.8 bln while real imports fell by $1.4 bln. Net exports could contribute 2-3 percentage points to Q3 GDP. A combination of factors drove this, and it probably will not be repeated in Q4.

It seems rich for many observers to say that OPEC+ decision to cut output is a snub against the US. The Federal Reserve's monetary policy is making it more difficult for many countries but few of the OPEC+ critics want the Federal Reserve to sacrifice its domestic mandate,  The OPEC+ decision may be short-sighted, as the White House claims,  these countries pursuing what they think is their national interest. A few years ago, many of these critics thought OPEC was dead. Moreover, actions by the US and Europe, such as the embargo on Russian oil and cap on prices, impacts the oil market. The US official comment that the yesterday's decision shows OPEC is aligning with Russia shows a masterful grasp of the obvious. OPEC+ is set to continue through 2024. OPEC was struggling to be the swing producer, partly because of the rise of US production. The answer for the cartel to the competitive challenge was to increase its market share by forming the alliance. Some pundits suggest the US should stop selling weapons to Saudi Arabia and others in OPEC. Yet, what is missing is the understanding that the US does not assist in the defense of the Saudi Arabia or oil pipelines out of a sense of altruism, but because it is understood to be in the US national interest. Should the US really take on the position of Gandhi's mother who would fast (punish herself) when her prodigious son disappointed?  Implicit in Biden's threat yesterday will be to reanimate the NOPEC bill that has been in Congress for some time that would allow lawsuits against OPEC members for manipulated the energy market.

The US reports weekly jobless claims and the Challenger jobs cuts. In the last week in September, weekly jobless claims fell to five-month lows. The JOLTS data, earlier this week (August) disappointed, and tomorrow the national September figures will be reported. The median forecast in Bloomberg's survey calls for an increase of 260k after a 315k increase in August. Today, five Fed officials speak (Kashkari and Mester twice). These Fed officials' views are well known, and indeed, everyone seems to be singing from the same hymn sheet. The market recognizes this, and the implied yield of the December Fed funds futures contract is rising today for the sixth consecutive session.

The US dollar found a bottom against the Canadian dollar in the past two sessions near CAD1.3500. It recovered yesterday and closed above CAD1.3600. It initially pulled back in Asia, as US stocks were bid. It found support near CAD1.3565. The greenback has recovered in the European morning to reach the session high around CAD1.3665. Yesterday's high was just shy of CAD1.37. While taking cues from US equities, note that intraday momentum for the greenback overextended against the Canadian dollar. After a push to almost MXN20.60 in late September, the US dollar has returned to the MXN19.80-MXN20.20 range that has dominated since mid-August. It is in a narrow range (~MXN20.0175-MXN20.1050) today. It appears to have scope to test yesterday's high near MXN20.15. 


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Futures Slide As OPEC+ Cut Sparks Gas Inflation Fears And “Tighter For Longer” Fed

Futures Slide As OPEC+ Cut Sparks Gas Inflation Fears And "Tighter For Longer" Fed

Two days ago, when stocks were melting up even as oil was…

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Futures Slide As OPEC+ Cut Sparks Gas Inflation Fears And "Tighter For Longer" Fed

Two days ago, when stocks were melting up even as oil was storming higher and threatened to rerate inflation expectations sharply higher, we mused that algos were clearly ignoring this potentially ominously convergence.

And while yesterday we saw the first cracks developing in the meltup narrative as oil extended gains following OPEC's stark slap on the face of the dementia patient in the White House, it was only today that the "oil is about to push inflation sharply higher" discussion entered the broader financial sphere, with JPM writing this morning that "OPEC+ presents inflation risk", Bloomberg echoing JPM that "OPEC+ alliance’s plan to cut oil supply stoked inflation fears and as traders awaited labor-market data to gauge the risk of recession" and Saxo Bank also jumping on the bandwagon, warning that OPEC+ supply cut will worsen global inflation which "raises the risk of inflation staying higher for longer” and “sends the wrong signal to the US Federal Reserve... It could send a signal that they have to keep on their foot on the brake for longer.”

And sure enough, with oil rising above its 50DMA for the first time since Aug 30, futures have slumped overnight as oil kept its gains, with S&P and Nasdaq 100 futures both sliding 0.5% as of 730am, while Europe’s Stoxx 600 erased an advance and traded near session lows. US crude futures held on to weekly gains of about 11% after the oil cartel said it would cut daily output by 2 million barrels. Treasuries were steady, the 10Y trading around 3.77%, with the 2Y rate hovering about the 4.15% level.

In pre-market trading, Credit Suisse jumped as much as 5.2% after JPMorgan upgraded to neutral from underweight, saying it sees $15bn as a minimum value for the lender, in-line with the estimated value of the Swiss legal entity. Shares were 2% higher by 13:20pm CET in Zurich, after Bloomberg News reported that the lender is trying to bring in an outside investor to inject money into a spinoff of its advisory and investment banking businesses, citing people with knowledge of the deliberations. Other banks did not do as well, and slumped in premarket trading Thursday, putting them on track to fall for a second straight day. Twitter shares fell as much as 1.1% to $50.75, trading nearly 7% below Elon Musk’s offer price of $54.20 as investors await progress in the revived deal. Here are the other notable premarket movers:

  • Pinterest (PINS US) shares jump as much as 5.8% in US premarket trading after Goldman Sachs upgraded the social networking site to buy from neutral on improving user growth and better engagement trends, even as the backdrop for digital advertising remains uncertain.
  • Biohaven Ltd. (BHVN US) shares rise 9.7% in US premarket trading, set to extend a 75% gain over the past two days as regular trading in the newly constituted drug developer began following an unusual deal with Pfizer Inc.
  • SurgePays (SURG US) shares soar as much as 11% in premarket trading after the company gave an update on subscriber numbers for its subsidiary SurgePhone Wireless.
  • Flutter (FLTR LN) gained 3.3% in premarket trading as it was initiated at outperform at Exane as the best-placed online gambling name, while Entain also at outperform and DraftKings started at underperform.
  • Richardson Electronics (RELL US) rose 8.2% in extended trading after reporting year-over-year growth in net sales and earnings per share for the fiscal first quarter.

While higher energy prices could stoke inflation, some have speculated that this will also divert discretionary income from core items thus pushing core inflation lower and hit company earnings -- potentially encouraging the Federal Reserve to slow monetary tightening.

While such expectations fueled equity gains this week, several money managers are cautioning that the economic path to a less aggressive Fed could be painful: “If you want to preempt the Fed, you are playing a very high-stakes game,” said Kenneth Broux, a strategist at Societe Generale SA. “The Fed do not want financial conditions to loosen; they don’t want equity markets to take off and get too comfortable.”

That said, investors are wary of placing large-scale equity bets as they await a report on US initial jobless claims later Thursday and the official nonfarm payrolls data Friday. A Bloomberg survey shows the US economy will have added 260,000 jobs last month; a higher-than-anticipated number may spook markets.

In Europe, the Stoxx 50 dropped -0.3% to session lows. Stoxx 600 outperforms peers, adding 0.2%, FTSE MIB lags, dropping 0.5%. Energy and insurance underperform while real estate and travel lead gains. Here are all the notable European movers:

  • Imperial Brands shares rise as much as 4.7% after the tobacco company said it will buy back up to £1b worth of stock. The move was welcomed by analysts, with RBC calling it a “big deal” and Citigroup saying the announcement was earlier than expected.
  • Home24 SE gains as much as 126% to EU7.53 after XXXLutz offered to buy all outstanding shares in the German online furniture retailer for EU7.50 apiece. The bid is generous and the deal is straightforward from a regulatory perspective, according to Tradition.
  • Credit Suisse jumps as much as 5.2% after JPMorgan upgraded to neutral from underweight, saying it sees $15b as a minimum value for the lender, in-line with the estimated value of the Swiss legal entity.
  • CMC Markets climbs as much as 6.5% after the online trading firm said it sees first- half net operating income up 21% y/y, with market volatility in August and September boosting the results. Numis upgraded the stock to add from hold following the report.
  • Shell drops as much as 5% as analysts say the oil and gas major’s trading update looks “weak” and may mean that FY consensus proves too ambitious.
  • Kloeckner falls as much as 12% as the company faces a “high likelihood” of an imminent profit warning, Bankhaus Metzler says, double-downgrading the stock to sell from buy.
  • Swiss Re is among the weakest members of the Stoxx 600 insurance index on Thursday, declining as much as 4.0%, as Morgan Stanley lowers its price target ahead of third-quarter earnings.
  • Accor drops as much as 2.5% after the hotel chain owner was downgraded to underweight from equal-weight at Barclays, which sees short-term risks as bigger for the company compared with peers and feels investors are looking more at potential negative factors heading into FY23 than 2022 upgrades.

Earlier in the session, Asian stocks rose for a third day as hardware technology stocks in South Korea and Japan advanced on views they may have reached a bottom. The MSCI Asia Pacific Index climbed as much as 0.9%, lifted by TSMC, SoftBank and Sony. The benchmark trimmed gains later in the day, but remains on track to advance for the week, following a seven-week losing streak that was the longest since 2015.Korea’s Kospi Index was the region’s best-performing major benchmark, jumping about 1%. The advance was helped by chipmakers extending their gains amid Morgan Stanley’s bullish view on the sector. Hong Kong stocks retreated after Wednesday’s catch-up rally.

Trading volume in the region was light as mainland China remains closed for the Golden Week holiday. The MSCI’s Asian benchmark has rebounded this week from its lowest in more than two years. The move tracked a nascent revival in global equities on bets that the Federal Reserve may turn less aggressive in its tightening. In a potential harbinger of shifting market views, Morgan Stanley strategists upgraded emerging-market and Asia ex-Japan stocks to overweight from equal-weight.   Investors are also optimistic that monetary policies in China and Japan, which have bucked the global wave of tightening to remain loose, could provide further support to the nations’ equities.  “While the rest of the world is tightening, Japan and China are still easing, especially China where we are going to see more easing policies going forward,” Chi Lo, senior investment strategist for Asia Pacific at BNP Paribas Asset Management, said in an interview with Bloomberg TV. “That makes us more positive on EM Asia.”

Japanese equities gained for a fourth day as investors awaited domestic corporate earnings coming out later this month.  The Topix rose 0.5% to 1,922.47 as of the market close in Tokyo, while the Nikkei 225 advanced 0.7% to 27,311.30. Sony Group contributed the most to the Topix’s gain, increasing 1.7%. Out of 2,168 stocks in the index, 1,564 rose and 490 fell, while 114 were unchanged. “There is relatively little concern about corporate earnings for Japanese stocks with the economy restarting and the yen weakening,” said Shogo Maekawa, a strategist at JPMorgan Asset Management.

In FX, the Bloomberg Dollar Spot Index consolidated within the recent day’s ranges, while Britain’s pound slipped 0.4% and gilt yields rose after Fitch Ratings lowered its outlook on the nation to negative. The greenback advanced against most of its G-10 peers. The euro steadied just below $0.99. Euro hedging costs are on the rise again as traders position ahead of Friday’s payrolls print and next week’s US inflation report. Commodity currencies were the worst performers along with the pound. Australian and New Zealand dollars gave up an Asia-session advance. The yen traded in a narrow range.

In rates, Treasuries were slightly cheaper across the curve after paring declines led by gilts in London trading after a Bank of England survey found expectations for higher prices. Focal points of US session include several Fed speakers and potential for risk-reduction ahead of Friday’s September jobs report Friday. US yields cheaper by less than 2bp across the curve in bear- flattening move, 10-year by 2bp vs 17bp for UK 10-year, the downside leader in developed market sovereign bonds.  German and Italian bond curves flattened modestly as yields on shorter-dated notes rose, while those further out fell.

In commodities, West Texas Intermediate futures traded near $88 a barrel, while Brent crude held near $93.30. The output-cut plan drew a warning from the White House about negative effects on the global economy. Goldman Sachs Group Inc. increased its fourth-quarter price target for Brent to $110 a barrel.

To the day ahead now, and data releases include German factory orders for August, the German and UK construction PMIs for September, Euro Area retail sales for August, and the weekly initial jobless claims from the US. Meanwhile from central banks, we’ll get the ECB’s account of their September meeting, as well as remarks from the Fed’s Evans, Cook, Kashkari, Waller and Mester, and the BoE’s Haskel.

Market Snapshot

  • S&P 500 futures down 0.3% to 3,783.50
  • STOXX Europe 600 up 0.3% to 400.25
  • MXAP up 0.4% to 145.05
  • MXAPJ up 0.3% to 471.37
  • Nikkei up 0.7% to 27,311.30
  • Topix up 0.5% to 1,922.47
  • Hang Seng Index down 0.4% to 18,012.15
  • Shanghai Composite down 0.6% to 3,024.39
  • Sensex up 0.6% to 58,403.02
  • Australia S&P/ASX 200 little changed at 6,817.52
  • Kospi up 1.0% to 2,237.86
  • German 10Y yield little changed at 2.05%
  • Euro little changed at $0.9886
  • Brent Futures up 0.3% to $93.62/bbl
  • Gold spot up 0.0% to $1,716.69
  • U.S. Dollar Index little changed at 111.24

Top Overnight News from Bloomberg

  • UK bond markets face a potential “cliff edge” when the Bank of England exits the market at the end of next week, leaving traders to navigate a turbulent backdrop without the support of a buyer of last resort
  • Millions more Britons will be dragged into higher rates of income tax over the next three years, costing twice as much as Prime Minister Liz Truss’s personal tax cuts, according to calculations by the Institute for Fiscal Studies
  • Britain’s construction industry turned more pessimistic in September after rising interest rates and the risk of recession held back new orders
  • The European Union plans to examine whether Germany’s massive plan to shelter companies and households from surging energy costs respects the bloc’s rules on public subsidies, EU Commissioner Thierry Breton said
  • German factory orders dropped in August after the previous month was revised to show an increase, hinting at a lack of momentum as the economy stands on the brink of a recession
  • Societe Generale SA cut its exposure to counterparties on trades in China by about $80 million in the past few weeks as global banks seek to guard against any potential fallout from rising geopolitical risks in the world’s second-largest economy

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded mixed as the region partially shrugged off the lacklustre lead from the US where the major indices snapped a firm two-day rally and finished the somewhat choppy session with mild losses amid higher yields and as Fed rhetoric essentially pushed back against a policy pivot. ASX 200 lacked direction amid underperformance in the Real Estate and the Consumer sectors, although the downside was also limited by strength in energy after oil prices were lifted by the OPEC+ output cut. Nikkei 225 was positive with notable gains in exporter names and with Rakuten leading the advances as Mizuho looks to acquire a 20% stake in Rakuten Securities for USD 555mln. Hang Seng was lacklustre and took a breather after the prior day’s more than 5% jump with the mood also not helped after Hong Kong PMI slipped into contraction territory for the first time in 6 months.

Top Asian News

  • Haikou city in China's Hainan imposed a COVID lockdown for Thursday, according to Bloomberg.
  • Malaysia PM May Propose Parliament Dissolution, Bernama Reports
  • Why Polio, Once Nearly Eradicated, Is Rebounding: QuickTake
  • Legoland Korea’s Default Flags Risks for Nation’s Developers
  • Paris Club Seeks China Collaboration in Sri Lanka Debt Talks
  • Yen Rout Is Over on Peak US Rate Hike Bets, Says Top Forecaster

European bourses are under modest pressure as sentiment broadly takes a slight turn for the worst amid limited newsflow as participants look to Friday's NFP. Currently, European benchmarks are lower by 0.1-0.3% while US futures are posting slightly larger losses of circa 0.7 ahead of Fed speak.

Top European News

  • Fitch affirmed the UK at AA-; Outlook revised to Negative from Stable, while it stated that the fiscal package announced as part of the new UK government's growth plan could lead to a significant increase in deficits over the medium-term, according to Reuters.
  • The UK Treasury is set to impose GBP 21bln of additional income taxes despite the "tax-cutting mini-budget", according to a study by the Institute for Fiscal Studies. (Times)
  • BoE Monthly Decision Maker Panel data - September 2022; looking ahead, DMP members expected CPI inflation to be 9.5% one-year ahead, up from 8.4% in the August survey, and 4.8% in three years’ time.
  • BoE's Cunliffe says the FPC will publish its next financial policy statement and record on October 12th, liquidity conditions in the run up to the BoE gilt intervention were "very poor", MPC will make a full assessment of recent developments at its November 3rd meeting.
  • UK government has proposed easing the fee cap for illiquid assets in pensions, according to a rule consultation publication by the government.
  • Swedish Economy Shrinks More Than Estimated on Weak Industry
  • UK Tech M&A Spree Pauses as Buyers Pull Out Amid Chaotic Markets

FX

  • USD benefits from the mentioned risk tone, with the DXY extending to a 111.35 peak to the modest detriment of peers.
  • However, EUR is relatively resilient and holding around 0.99 vs the USD as we await the ECB Minutes account for near-term guidance.
  • Cable faded sub-1.1400 and reversed through 1.1300 again amid the USD's move and prior to a letter exchange from the BoE to Treasury re. the Gilt Intervention.
  • Antipodeans under pressure given the USD move and associated action in metals, while the Yuan initially lent a helping hand but this has since dissipated.
  • Given the broader tone, the traditional havens are holding near unchanged levels though yield dynamics are a hinderance.

Fixed Income

  • Gilts are once again the standout laggard following rating agency action and the BoE DMP showing inflation pressures were already elevated MM before the fiscal update.
  • As such, the UK yield has extended back above 4.10%; in the US, yields are also bid though to a much lesser extent before Fed speak and Friday's jobs.
  • Back to Europe, Bunds are pressured though only modestly so vs UK counterparts awaiting the ECB's September account

Commodities

  • Crude benchmarks are modestly firmer at present, extending marginally above yesterday’s best levels with fresh newsflow limited as participants digest yesterday’s OPEC+ action.
  • WTI and Brent are towards the mid-point of circa. USD 1/bbl ranges, though Brent Dec’22 briefly surpassed the 200-DMA at USD 94.11/bbl before moving back below the figure.
  • Acting Kuwaiti Oil Minister said the OPEC+ decision to cut output will have positive ramifications for oil markets, while they understand consumers' concerns about prices increasing but added that the main motive in OPEC+ is balancing supply and demand, according to Reuters.
  • US National Security official stated the US sanctions policy on Venezuela remains unchanged and there are no plans to change the sanctions policy without constructive steps from Maduro, according to Reuters.
  • Norway's Budget proposes changing the temporary tax rules for the petroleum sector, entails that the uplift is reduced to 12.40% (prev. 17.69%), via Reuters.
  • Saudi sets the November Arab Light OSP to N.W Europe at Ice Brent +USD 0.90/bbl; to the US at ASCI +USD 6.35/bbl, via Reuters citing a document; to Asia at Oman/Dubai +USD 5.85 (Unch.), via Reuters sources.

Geopolitics

  • North Korea launched two short-range ballistic missiles which were fired from Pyongyang and landed outside of Japan's exclusive economic zone, according to the South Korean military cited by Yonhap. Furthermore, North Korea said that its missile launches are counteraction measures against the US and South Korean military drills.
  • North Korean jets and bombers have been seen flying in an exercise, according to Yonhap; South Korean jets take off in response, via Reuters.
  • US State Department condemned North Korea's ballistic missile launch and said North Korea's missile launches pose a threat to regional neighbours and the international community, while it added that the US remains committed to a diplomatic approach to North Korea and called on North Korea to engage in dialogue, according to Reuters.
  • The EU has approved the 8th round of Russian sanctions; as expected.

US Event Calendar

  • 08:30: Sept. Continuing Claims, est. 1.35m, prior 1.35m
  • 08:30: Oct. Initial Jobless Claims, est. 204,000, prior 193,000

Central bank Speakers

  • 08:50: Fed’s Mester Makes Opening Remarks
  • 09:15: Fed’s Kashkari Takes Part in Moderated Q&A
  • 13:00: Fed’s Evans Takes Part in Moderated Q&A
  • 13:00: Fed’s Cook Speaks on the Economic Outlook
  • 13:00: Fed’s Kashkari Discusses Cyber Risk and Financial Stability
  • 17:00: Fed’s Waller Discusses the Economic Outlook
  • 18:30: Fed’s Mester Discusses the Economic Outlook

DB's Henry Allen concludes the overnight wrap

After an astonishing rally at the beginning of Q4, markets reversed course yesterday as investors became much more sceptical that we’ll actually get a dovish pivot from central banks after all. The idea of a pivot has been a prominent theme over recent days, particularly after the financial turmoil during the last couple of weeks, thus sparking the biggest 2-day rally in the S&P 500 since April 2020 as the week began. But over the last 24 hours, solid US data releases have created a pushback against that narrative, since they were seen as giving the Fed more space to keep hiking rates over the coming months. And if markets had any further doubt about the Fed’s intentions, San Francisco Fed President Daly explicitly said yesterday that she didn’t expect there to be rate cuts next year, in direct contrast to futures that are still pricing in rate cuts from Q2. Indeed for a sense of just how volatile the reaction has been, 10yr bund yields were up by +16.3bps yesterday, which is their largest daily rise since March 2020 during the initial wave of the pandemic.

Looking at the details of those releases, it was evident that markets are still treating good news as bad news at the minute, since they sold off even as data pointed to a more resilient performance from the US economy than had been thought. For example, the ISM services index came in above expectations at 56.7 (vs. 56.0 expected), and the employment component moved up to a 6-month high of 53.0. So that’s a noticeably different picture to the manufacturing print on Monday, when there was a surprise contraction in the employment component. Furthermore, there was another sign of labour market strength from the ADP’s report of private payrolls, which came in at +208k in September (vs. +200k expected), and the previous month’s reading was also revised upwards. We’ll see if that picture is echoed in the US jobs report tomorrow, but there was a clear reaction to the ISM print in markets, as investors moved to upgrade the amount of Fed hikes they were expecting whilst the equity selloff accelerated.

Those expectations of a more hawkish Fed were given significant support by comments from Fed officials themselves. The most obvious came from San Francisco Fed President Daly, who was asked about the fact that futures were pricing in rate cuts, and said “I don’t see that happening at all”. In fact when it came to rates, she not only said that they were raising them into restrictive territory, but that they would be “holding it there” until inflation fell. Atlanta Fed President Bostic struck a similar tone, emphasising rate cuts in 2023 were not likely and that “I am not advocating a quick turn toward accommodation. On the contrary.” He said he wanted fed funds rates between 4% and 4.5% by the end of this year, “and then hold at that level and see how the economy and prices react.”

That backdrop led to a sizeable cross-asset selloff yesterday on both sides of the Atlantic. The effects on the rates side were particularly prominent, with 10yr US Treasury yields bouncing back +12.0bps to 3.75%. And that move was entirely driven by real yields, which rose +15.1bps as investors moved to price in a more hawkish Fed over the months ahead. You could see that taking place in Fed funds futures too, with the rate priced in for December 2023 up by +8.9bps to 4.19%, thus partially reversing the -22.2bps move lower over the previous two sessions. This morning, 10yr yields are only down -1.0 bps, so far from unwinding those moves.

The hawkish tones also proved bad news for equities, with the S&P 500 taking a breather following its blistering start to the week, retreating -0.20% after being as low as -1.80% in the New York morning. European equities did not enjoy the benefits of a New York afternoon rally, leading to a transatlantic divergence, and the STOXX 600 was down -1.02% on a broad-based decline. The energy sector outperformed in both the S&P 500 and STOXX 600 following a rally in crude oil which saw both Brent crude (+2.81%) and WTI (+2.53%) oil prices hit a 3-week high. That followed a decision from the OPEC+ group, who cut output by 2 million barrels per day. Those gains have continued in overnight trading as well, with Brent Crude now at $93.48/bbl.

In Europe, the performance of sovereign bonds echoed that for US Treasuries, as yields on 10yr bunds (+16.3bps), OATs (+17.6bps) and BTPs (+29.0bps) all saw their largest daily increases since March 2020. As in the US, that reflected growing scepticism about a dovish pivot from the ECB, but another factor not helping matters was the rebound in energy prices, with natural gas futures up +7.25% on the day to close at €174 per megawatt-hour, alongside the oil rebound mentioned above. That’s been reflected in inflation expectations too, with the 10yr German breakeven up another +8.0bps yesterday to 2.15%, after having closed beneath 2% on Monday for the first time since Russia’s invasion of Ukraine began.

Here in the UK, we also saw several key assets lose ground once again following their rally over the last week. For instance, sterling ended a run of 6 consecutive daily gains against the US Dollar to close -1.31% lower, closing back at $1.13. And that wasn’t simply a story of dollar strength, as the pound weakened against every other G10 currency as well. Gilts were another asset to struggle, with real yields in particular seeing significant daily rises of at least +30bps across most of the yield curve, including a +33.0bps rise for the 10yr real yield, and a +36.7bps rise for the 30yr real yield. That came as the Bank of England said they didn’t buy any gilts under their emergency operation for a second day running. In the meantime, there were fresh signs that the turmoil after the fiscal announcement was impacting the mortgage market, with Moneyfacts saying that the average 2yr fixed-rate mortgage had risen to 6.07%, which is the highest since November 2008. Last night that was then followed up by the news that Fitch had downgraded the UK’s outlook from stable to negative.

Overnight in Asia there’s been a mixed performance from the major equity indices. Both the Nikkei (+0.94%) and the Kospi (+1.25%) have recorded solid advances, which continues their run of having risen every day this week. In addition, futures in the US and Europe are both pointing higher, with those on the S&P 500 up +0.49%. However, the Hang Seng is down -0.43% and Australia’s S&P/ASX 200 is down -0.05%, whilst markets in mainland China remain closed for a holiday. The dollar index has also lost ground overnight, falling -0.25%, which comes in spite of those hawkish comments from Fed officials pushing back against rate cuts next year.

Looking at yesterday’s other data, the final services and composite PMIs mostly echoed the data from the flash readings. The composite PMI for the Euro Area was revised down a tenth to 48.1, and the US composite PMI was revised up two-tenths to 49.5. There was a bigger rise in the UK however, where the composite PMI was revised up seven-tenths to 49.1.

To the day ahead now, and data releases include German factory orders for August, the German and UK construction PMIs for September, Euro Area retail sales for August, and the weekly initial jobless claims from the US. Meanwhile from central banks, we’ll get the ECB’s account of their September meeting, as well as remarks from the Fed’s Evans, Cook, Kashkari, Waller and Mester, and the BoE’s Haskel.

Tyler Durden Thu, 10/06/2022 - 08:02

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