Weekly Insight 11/11 | Harris Fraser
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14 November, 2022
Weekly Insight 11/11

Weekly Insight 11/11

usa ​US

Markets quickly returned to optimism this week on hopes that a Fed pivot could be round the corner, fueled by the lower than expected inflation figure, the 3 major indices surged a whopping 5.36-7.46% over the past 5 days ending Thursday. The October headline inflation came in at 7.7% YoY, lower than both the market expected 8.0% and September’s 8.2%. In response, Fed officials expressed their views that rate hikes could slow down, but members still reiterated that slowing down on hikes does not imply a shift from the current tightening policy. Nevertheless, markets have reacted to the news with force, 10 year treasury yields fell to the 3.8% level, the Dollar Index fell below 108, and Bloomberg interest rate futures suggest Fed interest rates would peak at around 4.9% next year.

The US midterms were held on Tuesday, but full results have yet to be confirmed. Republicans will likely regain control over the House of Representatives, but the Senate race will likely depend on the key seat in Georgia, which entered a runoff scheduled for early December. In the crypto space, meltdown took place over the week as the second largest crypto exchange FTX is on the verge of bankruptcy, citing cash shortfalls of 8 billion USD. On the economic front, other than the softer than expected inflation data, labour markets have also showed signs of easing, as initial and continuing jobless claims came in higher than both market expectations and previous readings. Next week, US will be releasing October data on retail sales and industrial production, as well as the housing starts and existing home sales. The latest labour market data on initial and continuing jobless claims will also be released.

 

euro ​Europe

European markets steadied over the week, the UK, French, and German indices gained 0.55-5.10% over the past 5 days ending Thursday. The Bank of England announced that it will start selling off the assets purchased during the emergency earlier from 29th Nov onwards, marking the start of the end of the fiasco that took place during the Premiership of Liz Truss. On the monetary side, ECB officials continued to express their concerns over inflation in the region, Bundesbank President Joachim Nagel mentioned that the Bank has to act ‘decisively’ to bring down inflation, and reiterated his call for a reduction in ECB’s balance sheet. On the economic front, German industrial production was 0.6% MoM in September, which was better than the expected 0.2% expansion, and better than the previous month contraction of 1.2%. The UK also published their preliminary GDP for Q3, contracting 0.2% QoQ, which was better than the market expected 0.5% contraction. Next week, Europe will publish the industrial production figures for September, Germany will release the ZEW current conditions and economic sentiment for November, and the UK will release CPI figures for October.

 

china​China

China markets had a flat week, while Hong Kong equities were lifted by the positive surprise on the US inflation data, as well as encouraging signs from China. Over the week, the CSI 300 index edged 0.56% higher, while the Hang Seng index surged on Friday, gaining 7.21% over the week. China announced changes to quarantine rules for inbound travelers, and flight bans will no longer be enforced, investors saw this as a sign that there could be a pivot in the Zero COVID policy soon, market sentiment was lifted. It was reported that a few entities including National Association of Financial Market Institutional Investors, China Real Estate Association, and China Bond Insurance Co. met up with several property developers in discussions to help raise finances via bond issues. However, the overall situation of the sector remains severe. Economic fundamentals were disappointing, with total social financing and loan growth below market expectations. Exports in October also fell 0.7% YoY, CPI in October was 2.1% YoY. Both are lower than expectations and the previous month figures. Next week, China will release more October data on industrial production, fixed asset investment, and retail sales.

 

 

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