Early Morning Call: robust end of month for US and APAC equity markets
After Friday’s big gains in 24-hour trade, European markets look to open up, while APAC indices are mostly higher.
Indices overview
In the APAC region, indices closed higher, following the lead of US equity markets on Friday.
The Dow Jones is on track for its best month since 1976, up over 14% so far in October despite mixed third quarter (Q3) earnings season so far.
In China, the NBS manufacturing PMI fell to 49.2 in October from 50.1 in September, missing market forecasts of 50.0. This was the lowest reading since July, as COVID restrictions affected output and exports. Non-manufacturing PMI also fell to 4 8.7 from 50.6 the previous month, the first contraction in the services sector since May.
In Japan, industrial production fell by 1.6% in September month-on-month (MoM), economists expected a 1% drop, retail sales rose by 4.5% in September year-on-year (YoY), better than the 4.1% forecast, and consumer confidence fell to 29.9 in October, its lowest level since August 2020.
Australia retail sales increased by 0.6% in September compared to August, in line with expectations.
European indices opened in positive territory. In Germany retail sales unexpectedly rose by 0.9% in September, after a 1.3% drop the previous month. Economists had anticipated a fall of 0.3%.
Later this morning investors await the latest eurozone gross domestic product (GDP) data. Economists anticipate a 0.2% rise compared to the previous quarter, after 0.8% in the second quarter (Q2).
Fed meeting
The biggest event of the week is undoubtedly the two-day Federal Reserve (Fed) meeting that will start on Tuesday. If a majority of economists expect a 75-basis point hike, they are also waiting for any signal that the Fed could slow the pace of its hikes in the coming months.
On Friday, the core PCE price index, an indicator highly regarded by the Federal Reserve, increased by 0.5% from the previous month and by 5.1% over the past 12 months. The monthly gain was in line with consensus, but the annual increase was below the 5.2% forecast.
Forex
The pound has been rallying last week, after the appointment of Rishi Sunak as prime minister. GBP/USD now trades above $1.16, while EUR/USD is at a seven-week low.
Commodities
WTI and Brent are trading lower this morning.
On Friday, Baker Hughes total rig count declined by three to 768. The number of oil rigs in operation fell by two to 610 while gas rigs fell by one to 158.
Chicago wheat futures jumped as Russia's withdrawal from a Black Sea export agreement raised concerns over global supplies.
The price of corn is also rising.
Finally, a word on cotton: the soft commodity posted a seventh week of declines last week, dropping to levels not seen since December 2021.
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