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Senior Research Strategist at Pepperstone
(MENAFN- Your Mind Media ) DIGES– – Stocks advanced modestly yesterday as markets remained in risk-on mode amid the end of the record long US government shutdown. Today, UK GDP highlights the docket, as we await news on when delayed US data may be released.
W–ERE WE STAND ’ Let’s start with the UK this morning.
In good news, we have the ONS, who have made the pragmatic and correct decision to publish less official data next year, particularly when it comes to various regional statistics, instead focusing their limited resources on repairing the quality of top-tier releases such as employment and G’P figures. While I’ve been highly critical of the ONS of late, I will also’give credit where it⦣8216;s due, a’d say a big ‘well done’ here, as it is absolutely the right thing to do to set aside ancillary figures, to ensure that the most important figures are as accurate as possible.
In bad news, though, we have more pre-Budget rumours. Not content with depressing us all by a near-certain 2p rise in the basic income tax rate at the end of the month, Chancellor Reeves now looks set to make it more expensive for us to‘‘drown our sorr’ws’ too, amid reports that alcohol duty will by the rate of RPI inflation (4.5% in Sept). Shares of UK-listed drinks makers took a bit of a hit on those reports, though nowhere near to the same extent that national morale will be hit if the price of a pint continues to soar.
Away from blighty, I suppose the biggest news is that the US government is back up and running again, with the House having passed the stopgap funding bill yesterday, and President Trump subsequently signing it into law. While there is an eleme‘t of ‘kicking the can down ’he road’ here, with funding for most departments now due to expire on 30th January, participants are very much viewing that as a problem to worry about next year.
In the …#8217;here and now’, markets remain much more focused, and rightly so, on how a resolution to the Congressional impasse removes not only a significant degree of uncertainty, but also a major growth headwind. As a result, the risk rally rolled on, with stocks on Wall Street gaining ground for the fourth day in a row, marking the longest winning streak for the S&P 500 since the tail end of last month.
A chunk of positivity on the trade front will certainly have helped here, with Treasury Secretary Bessent flagging the possibility of tariff relief on coff‘e, bananas ’nd ‘other items’ being on the way i’ the coming days. I’m no’ entirely sure why it’s taken seven months for the Administration to‘realise that’the whole ‘buy America’’ idea falls down when it’s impossible to make (or grow!) certain products in the USA, but at least they seem to have now finally seen sense.
Still, setting that aside, it does reinforce the bigger idea that, in the longer-run, what we continue to see is a much cooler tone on trade continuing to be adopted. That, of course, is just one pillar of what remains a solid underlying equity bull case, with earnings still growing at a solid clip, the underlying economy remaining resilient, and the monetary backdrop becoming increasingly loose.
Elsewhere, gold enjoyed a rather sizeable run higher, albeit with no obvious catalyst, as spot traded briefly north of the $4,200/oz mark for the first time in a couple of weeks. While we remain in a relatively broad $3,900/oz to $4,400/oz range, my bias remains for further upside from here on in, particularly given what seems to be insatiable demand from both physical retail holders, and reserve allocators. Those factors that underpinned th– bull case earlier in the year – namely, a hedge against geopolitical risk, runaway fiscal spending, and the potential for in–lation expectations to un-anchor – have hardly gone away, ’ut are now present in a market that’s much more cleanly positioned than it was this time last month, in turn firming up the case for greater upside.
While gold gained ground, markets elsewhere were rather more messy. Treasuries gained ground across the curve, though did pare some of that advance after a soft-ish 10-year sale reignited a few concerns over markets’ ability to absorb an incredible amount of supply in the coming months, not only in terms of govvies, but from corporates too, as the AI frenzy kicks up a gear.
Trade was also choppy in the FX complex, with the dollar giving up all of its early gains as trade wore on. The most notable move, though, came in the JPY, with USDJPY briefly trading north of the 155 figure for the first time since early-February, naturally spurring talk of the potential for MoF intervention.
Though the Takaichi Admin appear more concerned with recent JPY weakness than you might expect, especially considering that the recent move is broadly in line with underlying fundamentals (a dovish BoJ & uber-expansionary fiscal rhetoric), my gut feeling is tha’ we’re still a fair way from monetary intervention especially considering that recent moves have been relatively modest, and that implied vols remain relatively subdued. Despite that, with the base case pointing to further JPY weakness, barring a surprise hawkish BoJ pivot, the risk of another rou‘d of ‘yente’vention’ obv’ously can’t be ruled out entirely.
LOOK AH–AD – Though the government shutdown is ove’, we still won’t be getting the October US CPI report today, given no data has been collected, with participants still awaiting confirmation as to when, or indeed if, releases that have been missed will be published.
Consequently, the data docket is again relatively l’ght. This morning’s UK GDP stats are set to point to growth of 0.2% QoQ in the three months to September, though the data is rather stale, and risks quite clearly tilt to the downside as we look forward to the aftermath of the late-November Budget.
Elsewhere, all we have to get our teeth into is a 30-year Bond auction stateside, plus four Fed speakers, though wit‘ the FOMC firm’y in ‘data-dependent’ mode, concrete comments on the policy outlook seem unlikely.
Appreciate your cooperation in publishing the analysis.
For any inquiry or more information please do not hesitate to contact us.
Regards
W–ERE WE STAND ’ Let’s start with the UK this morning.
In good news, we have the ONS, who have made the pragmatic and correct decision to publish less official data next year, particularly when it comes to various regional statistics, instead focusing their limited resources on repairing the quality of top-tier releases such as employment and G’P figures. While I’ve been highly critical of the ONS of late, I will also’give credit where it⦣8216;s due, a’d say a big ‘well done’ here, as it is absolutely the right thing to do to set aside ancillary figures, to ensure that the most important figures are as accurate as possible.
In bad news, though, we have more pre-Budget rumours. Not content with depressing us all by a near-certain 2p rise in the basic income tax rate at the end of the month, Chancellor Reeves now looks set to make it more expensive for us to‘‘drown our sorr’ws’ too, amid reports that alcohol duty will by the rate of RPI inflation (4.5% in Sept). Shares of UK-listed drinks makers took a bit of a hit on those reports, though nowhere near to the same extent that national morale will be hit if the price of a pint continues to soar.
Away from blighty, I suppose the biggest news is that the US government is back up and running again, with the House having passed the stopgap funding bill yesterday, and President Trump subsequently signing it into law. While there is an eleme‘t of ‘kicking the can down ’he road’ here, with funding for most departments now due to expire on 30th January, participants are very much viewing that as a problem to worry about next year.
In the …#8217;here and now’, markets remain much more focused, and rightly so, on how a resolution to the Congressional impasse removes not only a significant degree of uncertainty, but also a major growth headwind. As a result, the risk rally rolled on, with stocks on Wall Street gaining ground for the fourth day in a row, marking the longest winning streak for the S&P 500 since the tail end of last month.
A chunk of positivity on the trade front will certainly have helped here, with Treasury Secretary Bessent flagging the possibility of tariff relief on coff‘e, bananas ’nd ‘other items’ being on the way i’ the coming days. I’m no’ entirely sure why it’s taken seven months for the Administration to‘realise that’the whole ‘buy America’’ idea falls down when it’s impossible to make (or grow!) certain products in the USA, but at least they seem to have now finally seen sense.
Still, setting that aside, it does reinforce the bigger idea that, in the longer-run, what we continue to see is a much cooler tone on trade continuing to be adopted. That, of course, is just one pillar of what remains a solid underlying equity bull case, with earnings still growing at a solid clip, the underlying economy remaining resilient, and the monetary backdrop becoming increasingly loose.
Elsewhere, gold enjoyed a rather sizeable run higher, albeit with no obvious catalyst, as spot traded briefly north of the $4,200/oz mark for the first time in a couple of weeks. While we remain in a relatively broad $3,900/oz to $4,400/oz range, my bias remains for further upside from here on in, particularly given what seems to be insatiable demand from both physical retail holders, and reserve allocators. Those factors that underpinned th– bull case earlier in the year – namely, a hedge against geopolitical risk, runaway fiscal spending, and the potential for in–lation expectations to un-anchor – have hardly gone away, ’ut are now present in a market that’s much more cleanly positioned than it was this time last month, in turn firming up the case for greater upside.
While gold gained ground, markets elsewhere were rather more messy. Treasuries gained ground across the curve, though did pare some of that advance after a soft-ish 10-year sale reignited a few concerns over markets’ ability to absorb an incredible amount of supply in the coming months, not only in terms of govvies, but from corporates too, as the AI frenzy kicks up a gear.
Trade was also choppy in the FX complex, with the dollar giving up all of its early gains as trade wore on. The most notable move, though, came in the JPY, with USDJPY briefly trading north of the 155 figure for the first time since early-February, naturally spurring talk of the potential for MoF intervention.
Though the Takaichi Admin appear more concerned with recent JPY weakness than you might expect, especially considering that the recent move is broadly in line with underlying fundamentals (a dovish BoJ & uber-expansionary fiscal rhetoric), my gut feeling is tha’ we’re still a fair way from monetary intervention especially considering that recent moves have been relatively modest, and that implied vols remain relatively subdued. Despite that, with the base case pointing to further JPY weakness, barring a surprise hawkish BoJ pivot, the risk of another rou‘d of ‘yente’vention’ obv’ously can’t be ruled out entirely.
LOOK AH–AD – Though the government shutdown is ove’, we still won’t be getting the October US CPI report today, given no data has been collected, with participants still awaiting confirmation as to when, or indeed if, releases that have been missed will be published.
Consequently, the data docket is again relatively l’ght. This morning’s UK GDP stats are set to point to growth of 0.2% QoQ in the three months to September, though the data is rather stale, and risks quite clearly tilt to the downside as we look forward to the aftermath of the late-November Budget.
Elsewhere, all we have to get our teeth into is a 30-year Bond auction stateside, plus four Fed speakers, though wit‘ the FOMC firm’y in ‘data-dependent’ mode, concrete comments on the policy outlook seem unlikely.
Appreciate your cooperation in publishing the analysis.
For any inquiry or more information please do not hesitate to contact us.
Regards
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