Climbing the wall of worry…

Thoughts of the Day

Despite Middle East tensions and inflation concerns, the US stock market rose 1%, with all 11 S&P sectors and 92% of S&P stocks closing positive. The VIX dropped from 20 to 17, indicating diminishing fear. If risk sentiment is staying resilient in the face of relentless bad news, the bears will be on the run when we start getting positive news

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Day Ahead

The Canadian Consumer Price Index (CPI) is expected to show that prices rose 4% Year-on-Year in September as it did in August.

The US Retail Sales is expected to rise +0.3% Month-on-Month in September, lower than +0.6% in August.

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What Happened Yesterday

Market Movements as of New York Close 16 Oct 23
  • Fedspeak:
    Harker (2023 voter, known centrist):
    “Fed should not be considering more rate increases.”
    Goolsbee (2023 voter, known dove): “Fall in the US inflation was not “just a blip.”
    (both same tone as previous – just last week and the week before)
  • The RBA Meeting Minutes highlighted that members thought the case for holding interest rates steady was stronger as the central bank contemplated raising rates by +0.25%. Despite members acknowledging that upside risks to inflation were a “significant concern”, the members also believed the labour market had reached a turning point. As such, they decided to keep rates unchanged, but noted that further tightening may be required if inflation is more persistent than expected.
  • The US Treasury Yield curve inversion narrowed to 0.38% as the US 2-year bond yield rose +0.05% to 5.09% while the US 10-year bond yield rose +0.08% to 4.71%.
  • The US stock futures traded within a small range through the Asian and London trading hours with the S&P 500 rising +0.26% before the New York session began.
  • The US stock market opened higher from Friday. The market then had a relief rally on Monday following the strong earnings from major US banks (JP Morgan, BlackRock, Citibank, Wells Fargo and PNC Financial Services Group) last Friday as well as dovish comments from Fed speakers. Consequently, the S&P 500 closed +1.06% lower (high: +1.28%, low: +0.34%), the Dow rose +0.93% (high: +1.24%, low: +0.48%) while the Nasdaq gained +1.18% (high: +1.43%, low: +0.35%).
  • The crypto market continues to trade on the stronger side as there was a false rumour that the Securities and Exchange Commission approved the first bitcoin spot ETF from BlackRock. Bitcoin hit a high of 30,127 (+10.7%) when the rumour first surfaced but fell -6.9% to 28,027 after BlackRock denied the rumour. It then rose slightly during the US trading session to close +5.02% higher on the day. Ether is up +2.70% on the day.
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Headlines & Market Impact

Apple’s iPhone loses top spot in China to Huawei: Analysts

Notable Snippet: Apple’s iPhone has officially been dethroned from its position as the smartphone market share leader in China, according to a Monday report from Jefferies analysts.

The analysts said smartphone sales in China have shown positive growth year over year, driven primarily by high double-digit growth in Android sales led by Huawei, Xiaomi and Honor devices. But Apple’s iPhone has seen a significant, double-digit decline, and its volume growth year over year has been negative since the iPhone 15 launched, according to the analysts.

As a result, Huawei overtook the iPhone in the No.1 spot for market share.

“We believe weak demand in China would eventually lead to lower-than-expected global shipments of iPhone 15 in 2023,” the analysts wrote, adding that the trend suggests the iPhone will “lose” to Huawei next year.

The analysts noted that resale iPhone 15 devices are all “trading at discounts to official selling prices,” which also reflects the weak demand in China.

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As India frowns on paying for Russian oil with yuan, some payments held up: Sources

Notable Snippet: The Indian government’s discomfort over letting state-controlled refiners pay for Russian oil imports with Chinese currency has held up the payment for at least seven cargoes, people with direct knowledge of the matter said.

The tussle over payment has not disrupted deliveries so far, with Russian firms such as Rosneft continuing to supply state-controlled Indian refiners, who are seeking alternative ways for settlement.

Reuters reported in July that Indian refiners began using yuan to pay for some oil from Russian sellers while continuing to use dollars and dirhams to settle most of their Russian oil purchases.

The Indian government, however, has become uncomfortable with using yuan for settlement, two finance ministry officials told Reuters.

And, based on comments from officials at affected refiners, payment for at least seven cargoes is still pending. Some payments for recent cargoes delivered to at least two state refiners have been pending since the last week of September.

Two refining sources said settlement in yuan increases their costs, as rupees first need to be converted to Hong Kong dollars and then yuan, a process that costs 2 per cent to 3 per cent more than settling in dirham.

However, in India, some people see using the yuan as benefiting China, when ties between the two neighbours remain strained after a border clash in 2020 in which 20 Indian soldiers and four Chinese troops were killed.

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Bitcoin gives up gains after BlackRock denies ETF approval report

Notable Snippet: Bitcoin rose suddenly on Monday, before giving up nearly all its gains, after asset manager BlackRock denied a crypto media report that U.S. regulators had approved its high-profile application for a crypto investment product.

Bitcoin, known for its volatility, was last trading up 3.82% at $28,211, after earlier rising as much as 10% to $29,900, its highest since August.

Crypto news outlet Coin Telegraph had earlier reported that the U.S. Securities and Exchange Commission had approved an application by major asset manager BlackRock for a spot bitcoin exchange-traded fund, before later retracting the story.

BlackRock later confirmed to Reuters that “the iShares Bitcoin ETP application is still under review by the SEC.” Sources close to the SEC also confirmed that the application is still pending.

“Crypto markets have just shown how sensitive they are to any potential good news, with their premature rally today on rumours of the approval of a spot bitcoin ETF,” said Ben Laidler, global markets strategist at eToro.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord