CURRENCY MARKET WRAP
As of Mon Oct 14th, Singapore Time zone UTC+8
U.S. Dollar Index, -0.41%, 98.30
USDJPY, +0.42%, $108.42
EURUSD, +0.33%, $1.1042
GBPUSD, +1.66%, $1.2649
USDCAD, -0.71%, $1.3198
AUDUSD, +0.40%, $0.6789
NZDUSD, +0.30%, $0.6339
U.S. Import prices were up 0.2% m/m in September, fuel import prices were up 2.1%, and nonfuel import prices were down 0.1%. Export prices were down 0.2%, agricultural export prices were down 1.8%, and non-agricultural export prices were down 0.1%. The key takeaway from the report is that it shows a lack of inflation pressure for both import and export prices. The preliminary University of Michigan Consumer Sentiment Index for October checked in at 96.0 (consensus 89.9), up from the final reading of 93.2 for September. Real income expectations rose to their highest level in two decades. That’s a good portent for consumer spending activity.
The second day of trade talks between representatives from China and the U.S. started with considerable optimism, which President Trump made sure to highlight in a morning tweet. The first two hours of the session saw an aggressive rally that was paced by cyclical sectors, and briefly lifted the S&P 500 above its high from October 1. The benchmark index hit a session high shortly after the Federal Reserve confirmed what Fed Chairman, Jay Powell, signalled earlier this week.
Starting Tuesday, the Federal Reserve will begin purchasing Treasury bills at a pace of $60 bln per month. The purchases will continue into the second quarter of next year or longer. In addition to these purchases, the Fed will continue conducting regular overnight and term repurchase operations through at least January. The Fed noted that it is looking to return bank reserves to a level that was seen in early September. The program, which is aimed at steepening the yield curve by pressuring Treasury bill yields, was foreshadowed by the September FOMC Statement and Fed Chairman Powell’s remarks made on Monday and Tuesday.
Risk assets backed off its session high in midday trade, but received a midday boost after Bloomberg reported that a partial trade deal was reached at Friday’s meeting. The report, which made the rounds before Trump’s meeting with China’s Vice Premier Liu He, said that the deal calls for increased agricultural concessions from China in exchange for some tariff relief. Trump later said that a “very substantial phase 1 deal” has been reached that covers intellectual property, financial services, and agricultural purchases.
STOCK MARKET WRAP
S&P500, +1.09%, 2,970.27
Nasdaq, +1.34%, 8,057.04
Nikkei Futures, +1.30%, 21,800.0
The major averages ended a bumpy week on a higher note. The S&P 500 gained 1.1% to end the week higher by 0.6% while the Nasdaq (+1.3%) outperformed, rising 0.9% for the week. Small caps had an even better showing today as the Russell 2000 rose 1.8%, climbing 0.8% for the week.
Even with the weak finish, eight sectors recorded gains. Cyclical sectors held the lead throughout the day with industrials (+2.0%), materials (+1.9%), technology (+1.5%), energy (+1.4%), and financials (+1.3%) ending ahead of the broader market. Conversely, rate-sensitive utilities (-0.4%), real estate (-0.3%), and consumer staples (-0.1%) underperformed as Treasury yields rose amid the improvement in risk tolerance.