Early Morning Call: currency traders gear up for non-farm payrolls

Indices overview

Indices in Hong Kong and mainland China jumped overnight on speculation that China could loosen its strict zero-Covid policy. The Hang Seng rose as much as 7%.

The rumours also had an impact on commodity currencies. The Australian dollar was the best performer, rising against all major currencies. Base metals are also benefiting from these speculations.

Forex

GBP/USD has pared some of yesterday's losses overnight. Yesterday the pound plummeted after the Bank of Englang (BoE) Governor, Andrew Bailey, warned the markets that the British economy might not grow for another two years, a situation not seen in 100 years.

Despite this gloomy outlook, the BoE raised its interest rate by 75-basis points (bps) to 3% in an effort to control inflation, currently more than five times higher than its target.

Germany factory orders fell by 4% in September month-over-month (MoM), while economists expected a smaller decline of 0.5%. Later this morning, Eurozone producer price index (PPI) is expected to rise by 2.7% in September MoM.

Currency traders are gearing up for the final big event of the week: non-farm payrolls (NFPs) for the month of October. Economists expect 200,000 job creations, which would be the smallest gain since December 2020.

The unemployment rate is forecast to rise to 3.6% from 3.5% in September, and average hourly earnings to increase by 0.3% MoM, 4.7% year-over-year (YoY).

Earnings

Societe Generale, the third biggest bank in France, joined European rivals in posting a higher-than-expected third quarter (Q3) net income as market volatility boosted trading revenues. Net income reached €1.5 billion, well above a Refinitiv consensus forecast of €1bn.

According to the Wall Street Journal, quoting people close to the matter, Kering is in advanced talks to buy fashion brand Tom Ford. In early August, the Journal reported that Estee Lauder was in talks to buy Tom Ford in a $3 billion deal. But now it seems that the French luxury group, owner of Gucci, could be reaching a deal soon.

PayPal shares slipped by 13% in extended hours trading, after the online payment firm cut its annual revenue growth forecast. PayPal posted an adjusted profit of $1.08 per share for the third quarter, higher than analysts' expectations of 96 cents a share, but lower than the $1.11 posted in the same quarter a year ago.

Paypal boss, Dan Schulman, said in a statement yesterday that he expected e-commerce to be “pretty muted” in the fourth quarter, and in anticipation of a broader economic downturn, the group cut it adjusted growth outlook to 10% from 11% previously for the year.

Paypal is not the only one to have issued conservative forecasts reflecting an expected tightening in consumer spending. Last week, Mastercard also forecast weaker-than-expected revenue growth for the holiday quarter.

Coinbase reported third quarter revenue that missed analysts' estimates, and the cryptocurrency exchange had a wider-than-expected loss. Coinbase posted an adjusted loss $2.43 per share. That's lower than analysts’ expectations of a $2.40 loss. During the same quarter a year ago, the crypto exchange posted earnings of $1.62 per share.

Revenue also missed forecasts, falling to $590.3 million, which is less than half what the group generated a year ago, and below estimates of $645mn.

Watch out for Starbucks shares at the open today. The group posted earnings of 81 cents per share, versus analysts' expectations of 72 cents. Revenue was also higher than expected, up 3.3% at $8.41bn versus forecast of $8.31bn. Global same-store sales increased 7%, fuelled by increased spending in its home market in the US where same-store sales growth was 11%, which was the result of people spending more on average and a slight uptick in traffic.

Commodities

Oil prices rose in excess of 2% this morning, and are on track to clinch a third consecutive week of gains.

Oil traders await Baker Hughes data tonight. US oil and natural gas rigs fell last week but edged up in October in the first monthly increase since July as drillers largely held activity steady despite high energy prices and soaring profits.