The Overnight Report: Risk Off Friday

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World Overnight
SPI Overnight	8118.00	– 52.00	– 0.64%
S&P ASX 200	8160.00	– 20.40	– 0.25%
S&P500	5705.45	– 108.22	– 1.86%
Nasdaq Comp	18095.15	– 512.78	– 2.76%
DJIA	41763.46	– 378.08	– 0.90%
S&P500 VIX	23.16	+ 2.81	13.81%
US 10-year yield	4.28	+ 0.02	0.42%
USD Index	103.81	– 0.19	– 0.18%
FTSE100	8110.10	– 49.53	– 0.61%
DAX30	19077.54	– 179.80	– 0.93%

By Chris Weston, Head of Research, Pepperstone

Good morning.

Traders have had to navigate a mix of de-leveraging after a poor Chicago PMI report (41.6 vs 46.6 in Sept), reduced expectations for Trump’s election prospects and a broad position unwind in several of the well-owned and loved markets.

Sentiment hasn’t been tarnished to any great degree, and despite a rise in the VIX into 23% and a rally in the JPY, in part leading to increased selling in US tech and consumer discretionary plays, both Intel and Amazon have greatly impressed on their earnings, which has supported both the NAS100 and S&P500 futures post US cash close.

It was a tough day at the office for US equity traders, with the S&P500 cash index closing at -1.9% and the NAS100 cash index at -2.4%, with heavyweight MAG7 basket -3.6%.

Intraday, we can see S&P500 futures trading heavy through European trade, with sellers stating their case more emphatically as the US cash session got underway. Volumes in the S&P500 futures kicked in hard at 5802 and through 5800, with sellers taking the futures into 5747, before consolidating and tracking a range for most of US cash trade.

Apple’s Q4 earnings got the lion’s share of attention, where we see the actuals coming in modestly above the street’s expectations on Q4 sales, with iPhone revenue coming in at US$46.22b vs US$45.04b. Sales to China were a tad under expectations and maybe the market was looking for more in the full result, as shares trade -1.4% lower after hours, and we can see the negative reaction in our Apple 24hr CFD.

The USD has seen a mixed reaction across the G10/EM FX complex, with GBPUSD -0.5%, and trading through 1.2900 and to new run lows in the trend that started in late September. 

Gold and Bitcoin have been well subscribed Trump trades lately, and positioning is rich. While momentum has been a factor positively impacting both markets, we’ve seen longs taking chips off the table as we head into what is arguably an incredible period ahead of tier 1 event risk.

If gold is seen a hedge against geopolitical news flow, we didn’t see that on display in the price action on the day, and while crude has gained 3% on news (which was later denied) that Iran is preparing for a major retaliation within days, gold saw one-way selling in early US trade, moving in lockstep with S&P500 futures.

Looking ahead, the ASX200 looks to open the final trading session of the week -0.7% lower on open.

With little data to trouble through Asia, the focus shifts towards upcoming US trade, and the risks to positioning that come from the US non0farm payrolls and ISM manufacturing prints. With the US NFP data so distorted by weather-related incidents and port strikes, it may be harder to get a true signal from the data, but the unemployment rate, payrolls print, and revisions and average hourly earnings still has the capacity to move the dial it remains a risk to markets.

On the calendar today:

-New Zealand Sept Building Permits

-Australia Oct & 3Q manufacturing PMI

-US Oct Non farm payrolls, unemployment rate

-Austal ((ASB)) AGM

-Integral Diagnostics ((IDX)) AGM

-Ioneer ((INR)) AGM

-Macquarie Group ((MQG)) earnings report

-Steadfast Group ((SDF)) AGM

-Spark New Zealand ((SPK)) AGM

-Vulcan Steel ((VSL)) AGM

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Corporate news in Australia:

-ACCC chair Gina Cass-Gottlieb has called for banking competition reform

Spot Metals,Minerals & Energy Futures
Gold (oz)	2753.95	– 44.55	– 1.59%
Silver (oz)	32.80	– 1.14	– 3.35%
Copper (lb)	4.36	+ 0.00	0.07%
Aluminium (lb)	1.18	+ 0.00	0.31%
Nickel (lb)	7.08	– 0.04	– 0.54%
Zinc (lb)	1.37	– 0.02	– 1.71%
West Texas Crude	70.52	+ 1.43	2.07%
Brent Crude	74.08	+ 1.37	1.88%
Iron Ore (t)	103.78	– 0.30	– 0.29%

By Samer Hasn, Senior Market Analyst at XS.com

Gold is under pressure and is tipped to retreat below US$2,780 per ounce after an historic high of US$2,790/oz.

Gold’s moves come as inflation, the Fed’s preferred gauge, has shown stickiness in its September reading and is accelerating again, along with a set of figures that are reinforcing the US economy’s healthy image, reducing economic uncertainty. Also, increasing talk of a possible ceasefire in Lebanon could prevent gold from making gains by benefiting from the geopolitical risk premium.

Core Personal Consumption Expenditure (PCE) Price Index growth accelerated from 0.2% to 0.3% on a monthly basis in September, in line with analysts’ expectations. The annual reading held steady at 2.7%, contrary to expectations of a slowdown to 2.6%.

In addition, personal spending growth accelerated to 0.5% on a monthly basis, beating expectations of 0.3% growth. Personal income also grew by 0.3% from 0.2%.

These figures come after better-than-expected ADP nonfarm employment and third-quarter GDP figures. While the US economy grew at a slower pace than expected in the last quarter, consumer spending grew for the second straight quarter and at the fastest pace since the first quarter of last year at 3.7%, suggesting resilience in this sector that has contributed most of the growth despite the relatively high-interest rate environment. This is in addition to government spending growth for the second straight quarter and a notable acceleration in export growth to 8.9%.

These figures have slightly weakened the probability of the Fed cutting interest rates by -25 basis points in January next year, but this probability is still above 43%, according to the CME FedWatch Tool. While expectations have not changed substantially regarding the November and December meetings, where a quarter-point rate cut is expected at each meeting.

The bond market has shown limited movement today, which may be due to the confusion that markets are experiencing with anticipation of more economic data and the results of the presidential election, in addition to the development of geopolitical factors. 

The yield on the 10-year Treasury note is still hovering near 4.3%, and the ICE BofAML U.S. Bond Market Option Volatility Estimate Index (MOVE), which measures fear in the bond market, is still near its highest levels this year, reflecting the very high level of uncertainty in the fixed income market.

On the geopolitical front in the Middle East, hopes are growing about the possibility of reaching a ceasefire in Lebanon, after the significant progress made in negotiations between Hezbollah and Israel in the last hours, according to what the Axios reported, citing US officials.

This optimism was expressed by the Lebanese caretaker Prime Minister Najib Mikati, who said yesterday that he hopes an agreement will be reached in the coming hours or days. In addition to the Cypriot president’s statement after his meeting with US President Joe Biden that he believes an agreement can be reached within a week or two.

In contrast, US officials have expressed doubts about the possibility of this momentum in reaching an agreement to end the fighting before the US elections, according to CNN. As Prime Minister Benjamin Netanyahu is waiting to know the identity of the next president.

The position of the far-right coalition in Israel, which has always rejected any agreement that would stop the war, whether in Lebanon or Gaza, is also unclear. This coalition’s ministers are constantly threatening to resign, which could bring down Netanyahu’s government.

Also, in contrast to that optimism, CNN quoted a high-ranking official who said that Iran is planning to launch an attack on Israel, which he described as “decisive and painful”, in response to the recent attack on it, which Israel has been warned not to take. The source indicated that Iran may launch this attack the day before the elections.

These fears about the return of escalation to worsen in contrast to the optimism about a ceasefire will fuel the state of uncertainty surrounding the presidential elections and make the gold market more volatile. 

The return of a series of attacks and counter-attacks would expand the current conflict to include other countries in the region and oil supply chains flowing from the region, which would have an impact on the global economy, and this could contribute to re-fueling the bullish trend in gold.

The Australian share market over the past thirty days

Index	31 Oct 2024	Week To Date	Month To Date (Oct)	Quarter To Date (Oct-Dec)	Year To Date (2024)
S&P ASX 200 (ex-div)	8160.00	-0.62%	-1.33%	-1.33%	7.50%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
A2M	a2 Milk Co	Upgrade to Hold from Sell	Bell Potter
BSL	BlueScope Steel	Upgrade to Equal-weight from Underweight	Morgan Stanley
CRN	Coronado Global Resources	Downgrade to Hold from Accumulate	Ord Minnett
CTT	Cettire	Downgrade to Hold from Buy	Bell Potter
DRO	DroneShield	Upgrade to Buy from Hold	Bell Potter
IGO	IGO Ltd	Downgrade to Neutral from Outperform	Macquarie
PMV	Premier Investments	Downgrade to Neutral from Buy	Citi
SFR	Sandfire Resources	Downgrade to Neutral from Outperform	Macquarie
WOW	Woolworths Group	Downgrade to Neutral from Buy	Citi
ZIP	Zip Co	Downgrade to Neutral from Buy	Citi

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

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