Daily Market Outlook, October 10, 2024

Munnelly’s Macro Minute…

"PBOC’s 500bln Yuan Facility Supporting Risk Sentiment. US Inflation Data Eyed”

Asian stocks received a boost on Thursday from Chinese stocks as China's central bank launched its 500 billion yuan facility to stimulate capital markets, while the dollar remained near a two-month high ahead of U.S. inflation data later in the day. The People's Bank of China (PBOC) announced it would start accepting applications from financial institutions to join a newly created funding scheme, a plan it announced on Sept. 24 as part of a series of stimulus measures that drove Chinese stocks higher. China's blue-chip CSI300 recovered by 1.5%, a day after dropping 7% as investors remained focused on the details of the stimulus measures from Chinese authorities to help revive the stuttering economy. Hong Kong's Hang Seng rose 2.9%, after slipping 1.3% on Wednesday and is up 24% this year. The market is eagerly awaiting the finance ministry's press conference on Saturday, which will unveil the details of the fiscal stimulus plan. Once more information is provided on the scale of spending, other policymakers will be better positioned to implement complementary supportive policies within their respective domains.

The main takeaway from the Fed's minutes was the committee's clarity that choosing a 50bp drop was balanced decision versus a 25bp change. Although the "substantial majority" approved the bigger cut, it was observed that "some" would have preferred a 25bp drop and that "a few others" supporting the 50bp cut "could have supported just a 25bp reduction." One of the arguments made for the more moderate version was signaling a "more predictable path of policy normalisation".

The European data docket is scant with the macro driver of the day being US inflation data, headline CPI projected to slip 0.2ppts to 2.3% y/y & core down 0.1ppt to 3.1% y/y. As the headline rate hit 2.5% y/y, the sixth consecutive drop in annual US CPI inflation occurred in August; this is the lowest since February 2020. By comparison, the core rate stayed the same from July at 3.2% y/y. For September, markets expect comparable patterns. Although the price of oil was erratic over the month, generally the trend was down, which resulted in cheaper petrol prices. That indicates a likely 0.1% m/m monthly increase with some uncertainty of no change, which would cause annual inflation to drop even more to 2.3% y/y. The core rate appears once more to be set to decline by less, though. Still somewhat high services inflation balances deflation of goods prices, and housing costs remain a prominent factor. Though the annual pace may decrease somewhat to 3.1% y/y, economists project the monthly gain to be 0.2% m/m, the same as August. It still feels like it would be a major positive surprise to deter the market from expecting a 25bp rate drop is more likely than not at the Fed's November meeting even after last week's spectacular employment report.

Overnight Newswire Updates of Note

China Plans Bond Purchases For Stimulus
NZ Budget Deficit Widens On Costs
Bank Of Korea May Pivot As Property Cools
Powell’s 50bps Cut Unlikely To Repeat
Fed Minute Shows Split Over Big Rate Cut
Biden, Netanyahu Discuss Israel Retaliation On Iran
Trump Vows To End Taxation Abroad
Core CPI To Moderate, Easing Inflation Worries
BlackRock: US Bond Yields Near Fair
US Bond Premium Positive Amid Election
ASIC Raids ANZ Over Bond Manipulation
Amazon Adds Apple TV+ To Channels Store
HSBC Mulls Unit Mergers In Cost-Cutting Plan

(Sourced from reliable financial news outlets)

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FX Options Expiries For 10am New York Cut

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0930 (556M), 1.0950 (644M), 1.0975 (782M)
1.1000 (595M), 1.1040-45 (789M)
USD/CHF: 0.8450 (2.1BLN), 0.8575 (330M)
EUR/GBP: 0.8300 (320M), 0.8400 (280M)
AUD/USD: 0.6760 (4109M), 0.6775 (1.8BLN). NZD/USD: 0.6200 (351M)
NZD/USD: 0.5995-0.6000 (510M), 0.6050-60 (300M), 0.6200 (401M)
AUD/NZD: 1.0925 (1BLN), 1.1025 (1.2BLN)
USD/CAD: 1.3595-1.3600 (1.9BLN), 1.3650 (2.1BLN), 1.3725 (758M)
USD/JPY: 149.00 (703M), 149.25 (490M), 149.50 (1.8BLN)
149.80-90 (1.2BLN), 150.00 (1.1BLN). AUD/JPY: 100.00 (352M)

CFTC Data As Of 4/10/24

Euro net long position is 55,327 contracts
Japanese Yen net long position is 56,772 contracts
Swiss Franc posts net short position of -22,854 contracts
British Pound net long position is 93,765 contracts
Bitcoin net short position is -1,684 contracts
Equity fund managers cut S&P 500 CME net long position by 19,566 contracts to 1,047,707
Equity fund speculators trim S&P 500 CME net short position by 26,358 contracts to 302,277
Speculators increase CBOT US 10-year Treasury futures net short position by 118,611 contracts to 1,143,889

Technical & Trade Views

SP500 Bullish Above Bearish Below 5750

Daily VWAP bullish
Weekly VWAP bullish
Below 5720 opens 5660
Primary support 5575
Primary objective 5820

EURUSD Bullish Above Bearish Below 1.11

Daily VWAP bearish
Weekly VWAP bearish
Above 1.1030 opens 1.1120
Primary support 1.0850
Primary objective 1.0850

GBPUSD Bullish Above Bearish Below 1.3230

Daily VWAP bearish
Weekly VWAP bearish
Below 1.31 opens 1.29
Primary support is 1.29
Primary objective 1.29

USDJPY Bullish Above Bearish Below 144

Daily VWAP bullish
Weekly VWAP bullish
Below 141.50 opens 138
Primary resistance 152
Primary objective is 152

XAUUSD Bullish Above Bearish Below 2645

Daily VWAP bearish
Weekly VWAP bullish
Below 2600 opens 2550
Primary support 2550
Primary objective is 2720

BTCUSD Bullish Above Bearish Below 57000

Daily VWAP bearish
Weekly VWAP bullish
Below 57000 opens 52000
Primary support is 500000
Primary objective is 700000