CURRENCY MARKET WRAP
As of Fri Oct 25th, Singapore Time zone UTC+8
U.S. Dollar Index, +0.20%, 97.68
USDJPY, -0.07%, $108.61
EURUSD, -0.25%, $1.1104
GBPUSD, -0.62%, $1.2838
USDCAD, -0.01%, $1.3072
AUDUSD, -0.55%, $0.6816
NZDUSD, -0.70%, $0.6377
Vice President Mike Pence delivered a relatively hawkish speech on China, saying Beijing should not underestimate the resolve of Trump. On a related note, Bloomberg News reported that China is willing to purchase at least $20 billion of agricultural products from the U.S. in the first year after a partial trade deal is signed.
In Brexit, UK Prime Minister Boris Johnson will reportedly give more time to lawmakers to consider a Brexit deal, but only if they agree to a general election on Dec. 12.
The European Central Bank kept rates unchanged, as expected, and confirmed it will resume asset purchases at a monthly pace of 20 billion euros as of Nov. 1. After serving an 8-year term, Draghi left investors with a gloomy outlook and warning that low rates are here to stay. The moderation in services and construction activity along with weak wages and employment growth means the downside risks are prominent. Yesterday’s PMI reports confirm that activity is subdued in Germany and the Eurozone. Draghi called on governments with fiscal space to act because all successful monetary unions have a fiscal capacity.
U.S. Treasuries finished the session little changed. The 2-yr yield and the 10-yr yield were unchanged at 1.58% and 1.76%, respectively. The U.S. Dollar Index increased 0.2% to 97.68. WTI crude increased 0.7%, or $0.40, to $56.23/bbl.
Sweden’s central bank held its benchmark repo rate unchanged at -0.25% as expected on Thursday but surprised many by saying it would bring an end to an almost five-year experiment with negative rates in December even though the economy is slowing. “We don’t foresee a downturn round the corner and against that background and given the extreme monetary policy of going down to minus 0.50(%) we think it is the right thing to slowly move up towards zero,” Governor Stefan Ingves told reporters. Inflation was 1.3% in September versus the central bank’s 2% target. According to the Riksbank’s forecasts, inflation will not stabilize at roughly 2% until 2022. (USDSEK traded to low of 9.5577, Closed at 9.6583, +0.20%)
Norway’s central bank kept its main interest rate unchanged at 1.5% on Thursday as expected and said the economy had developed largely in line with forecasts made in September. Norges Bank last month raised rates for the fourth time in a year amid solid domestic growth, but said further tightening was unlikely as the global economy gradually slows. (USDNOK traded to low of 9.0854, Closed at 9.1449, +0.26%)
STOCK MARKET WRAP
S&P500, +0.19%, 3,010.29
Nasdaq, +0.81%, 8,185.80
Nikkei Futures, +0.56%, 22,777.5
Nasdaq benefited from upbeat results from a host of companies, including Microsoft (MSFT 139.94, +2.70, +2.0%), PayPal (PYPL 104.91, +8.27, +8.6%), Tesla (TSLA 299.68, +45.00, +17.7%), and Lam Research (LRCX 265.60, +32.42, +13.9%). The Philadelphia Semiconductor Index (+2.5%) rose on the back of Lam Research’s results and guidance.
It was no surprise, then, to see the S&P 500 information technology sector (+1.5%) as today’s outright leader ahead of the utilities (+0.4%) and materials (+0.4%) sectors. In terms of surprises, Tesla’s unexpected quarterly profit was one of them, but Twitter (TWTR 30.75, -8.08, -20.8%), as an S&P 500 component, woefully disappointed investors with its results and guidance.
3M (MMM 161.89, -6.87, -4.1%) and Ford Motor (F 8.60, -0.61, -6.6%) provided mixed results and attributed a cautious outlook to headwinds in China, while strong business in China helped Dow Inc. (DOW 49.47, +2.24, +4.7%) post better-than-expected results.
Amazon’s third-quarter earnings fell short of street expectations on Thursday, driving its stock down as much as 9% in after hours trading. The return to a heavy investment cycle is cutting into Amazon’s profitability. Its net income dropped to $2.1 billion, down 26% from the year-ago period’s $2.9 billion. For the fourth quarter, Amazon is forecasting operating income to fall between $1.2 billion and $2.9 billion, also below the $4.2 billion street estimate.