Summary:
The week was agitated. The instability of the UK bond market and government, the still-hot inflation, the big market swings... What a week.
We can only hope that after the next FED meeting (or the US elections) things get a bit clearer, because right now the markets seem range bound and with aggressive mood swings. Is there going to be a little rally? Why knows! Right now the markets seem like an unpleasant place to be. If you have doubts, stay out. Volatility is hotter than inflation.
Hot Inflation
Sources:
Trading Economics (United States Inflation Rate)
"The annual inflation rate in the US slowed for the third month running to 8.2% in September of 2022, the lowest in seven months, compared to 8.3% in August but above market forecasts of 8.1%. The energy index increased 19.8%, below 23.8% in August, due to gasoline (18.2% vs 25.6%), fuel oil (58.1% vs 68.8%) and electricity (15.5% vs 15.8% which was the highest since 1981). A small slowdown was also seen in the cost of food (11.2% vs 11.4% which was the highest since 1979) and used cars and trucks (7.2% vs 7.8%). On the other hand, prices for shelter increased faster (6.6% vs 6.2%). Meanwhile, the core rate which excludes volatile food and energy, rose to 6.6%, the highest since August of 1982, and above market expectations of 6.5% in a sign inflationary pressures remain elevated."
The FED Tightening is Here to Stay
Video: Fed's Daly on Rate Hikes, Inflation, Policy Coordination
Channel: Bloomberg Markets and Finance
A Good Summary of the Macroeconomic Situation
Videos:
Marc Faber: A Massive Systemic Shock Is Coming & The Fed Is Actively Courting It
Marc Faber: 'A Lot Of People Will Lose All Their Money' - Huge Market Losses Lie Ahead
Channel: Wealthion
OIL
WTI crude futures were trading around $86 per barrel on Friday, down more than 7% this week, as fears about a potential global recession-driven demand downturn continued to hang over the market. Earlier this week, several notable organizations, including OPEC, the US Energy Department, and the International Energy Agency, slashed their global oil demand forecasts in their monthly reports. Adding to concerns about softer demand was official data showing that US crude inventories surged by 9.9 million barrels last week, which is way more than market expectations for a 1.8 million barrel rise. A lackluster outlook for demand in top crude importer China as it clings to its zero-Covid policy also spooked investors. Putting a floor under prices were growing concerns about tighter global supplies as OPEC and its allies, including Russia, agreed to cut production by 2 million barrels per day.
Natural Gas
US natural gas futures remained below $6.5/MMBtu, close to 3-month lows and more than 30% below the 14-year high of $9.65/MMBtu hit on August 22nd as output remains at record levels and milder than usual weather is allowing utilities to inject more gas into storage. The latest EUA report showed US utilities added 125 billion cubic feet (bcf) of gas to storage last week, which is much bigger than usual and above market expectations of a 123 bcf build. It was the fourth consecutive week of increases above 100 bcf due to mild weather and an increase in wind power. Meanwhile, average gas output in the US Lower 48 states rose to 99.9 bcfd so far in October from a record 99.4 bcfd in September, according to Refinitiv. Also, weighing on gas prices was a drop in demand from power outages due to Hurricane Ian and reduced LNG exports. For the week, US natural gas prices are down almost 4%, the eighth consecutive week of falls.
US Stock Markets
US stocks extended losses on Friday, with the Dow losing nearly 400 points, and the S&P 500 and Nasdaq falling 2.1% and 3.1%, respectively. In the epicenter of the selloff was a report from the University of Michigan showing that US year-ahead inflation expectations increased for the first time in seven months. Such a reading put further pressure on the Federal Reserve to stick to its aggressive stance against runaway price growth and raised concern over a possible recession. Interest-rate sensitive tech shares declined over 2.5% on the news. Energy shares also declined over 3% as crude oil and other energy commodities declined. On the corporate side, JPMorgan, the biggest US bank by assets, rose more than 2% after reporting third-quarter results for profit and revenue that surprised investors on the upside. Wells Fargo also enjoyed some robust gains after revenue top estimates. The Dow was still up 1.2% this week, while the S&P 500 fell 1.3% and the Nasdaq 3.1%.
Bitcoin
Bitcoin US Dollar traded at 19117 this Saturday October 15th, decreasing 58 or 0.30 percent since the previous trading session. Looking back, over the last four weeks, Bitcoin lost 3.20 percent. Over the last 12 months, its price fell by 68.59 percent. Looking ahead, we forecast Bitcoin US Dollar to be priced at 17584 by the end of this quarter and at 13051 in one year, according to Trading Economics global macro models projections and analysts expectations.
Gold
Gold prices decreased by more than 1% to under $1,650 per ounce on Friday, the lowest in over two weeks and approaching the 19-month low of $1,621 hit on September 26 as new macroeconomic releases supported bets that the Federal Reserve will continue to tighten monetary policy aggressively, strengthening the dollar. Data compiled by the University of Michigan showed that year-ahead inflation expectations rose for the first time since March, exacerbating concerns of unsustainable price growth after September’s CPI print was hotter than expected. In the meantime, ECB President Lagarde said that board members are considering unwinding the central bank’s EUR 5 trillion in bonds from its balance sheet, adding to the preference for currencies. Due to its weak position in an environment of rising interest rates, investors continued to shun gold and opt for yield-baring havens as a safe store of value amid surging inflation and heightened economic uncertainties.
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