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25
Oct

U.S. Durable Goods Orders, UoM Consumer Sentiment & Inflation Expectations

calendar 25/10/2024 - 07:30 UTC

The U.S. dollar has experienced a reversal of most of its gains accrued over the past two trading sessions, with the dollar index losing 0.37% of its value on Thursday. The dollar's gains were fueled by expectations of slower interest rate cuts, supported by rising Treasury yields and resilient U.S. economic data. The yield on benchmark U.S. 10-year notes increased by 3.4 basis points (bps) to 4.24%, reaching a 3-month high of 4.26%.

Based on the CME Fedwatch tool, markets are currently pricing in a strong likelihood of a 25-basis-point interest rate reduction by the Federal Reserve. The probability of such a cut stand at 90.9%, while the odds of rates remaining unchanged are negligible at 9.1%.

In Asia, Japanese stocks were the region's worst performers this week and the Japan 225 declined 1.1% on Friday, hitting its lowest levels in three weeks. This downturn was attributed to investor concerns ahead of Japan's general election on Sunday. Local polls suggest that the ruling Liberal Democratic Party may fall short of securing a majority, increasing uncertainty about Japan's economic outlook. Next week, the central bank is expected to keep interest rates at their current level, however, investors question the extent to which it can raise rates given recent signs of economic weakness.

The main U.S. stock market benchmarks painted a mixed picture on Thursday, with the US 30 closing lower, while the US 500 and the US tech 100 rose, ending their recent losing streak, buoyed by Tesla's impressive performance. The electric vehicle maker surged over 20% following its better-than-expected quarterly results. Tesla's stock price experienced its largest one-day increase since 2013 after reporting strong third-quarter earnings and forecasting significant sales growth for the coming year. Improved margins and increased deliveries contributed to the positive results, despite intensifying competition in key markets.

Tesla's strong performance has raised hopes for similar results from Alphabet, Microsoft, Meta Platforms, and Amazon, which are scheduled to release their financial reports next week.

Market participants may see some price action later today as several key economic indicators are released. These include the German IFO business climate report, durable goods orders from the US, and the UoM Consumer Sentiment & Inflation Expectations surveys. Additionally, key FOMC speeches, could also influence market sentiment.

EUR/USD

The EUR/USD saw a modest recovery on Thursday, gaining 0.4% and edging back above the 1.0800 level. Despite this late week rebound, the pair remains sharply lower, having fallen from its late September peak near 1.1200.

Thursday's economic data out of Europe was mixed. The Eurozone's HCOB Purchasing Managers' Index (PMI) for October showed the Manufacturing PMI improving to 45.9, up from 45.0 in September and beating expectations of 45.1. However, the Services PMI disappointed, slipping to 51.2 from 51.4 in the previous month, missing forecasts of a rise to 51.6.

With the key Eurozone data releases for the week now behind us, markets will shift their attention to upcoming U.S. figures, including Durable Goods Orders and the University of Michigan's (UoM) 5-year Consumer Inflation Expectations.

EUR/USD

Gold

Gold prices rose late Thursday as U.S. Treasury yields fell, driven by increased demand for safe-haven assets amid rising Middle East tensions and uncertainty around the U.S. election.

The U.S. economy showed signs of strength, with S&P Global Flash PMIs outperforming expectations, though housing data was mixed—Building Permits fell, while New Home Sales increased.

On the geopolitical front, tensions remain elevated as Israeli officials issued strong warnings to Iran. An Israeli strike on Tehran could potentially lead to a further escalation in regional hostilities, adding to the uncertainty driving gold prices higher.

Gold

WTI Oil

Oil prices fell around 1% on Thursday in volatile trading following reports that the U.S. and Israel may pursue ceasefire talks in Gaza.

Earlier in the session, both benchmarks had risen by more than $1 per barrel due to concerns that the ongoing conflict in the Middle East could disrupt oil supplies, along with uncertainty surrounding the U.S. presidential election on November 5.

Amid the fast-approaching U.S. election, potential shifts in U.S. Middle East and oil policy could have significant effects. Former President Donald Trump currently holds a lead over Vice President Kamala Harris in betting markets, with Trump’s proposals to boost U.S. oil production expected to weigh on prices if enacted.

WTI Oil

US 500

The US 500 broke its three-day losing streak on Thursday, boosted by Tesla's strongest performance in over a decade following its better-than-expected quarterly results. US Tech 100 added modest gains on Thursday while US 30 retreated.

Tesla's Best Day Since 2013 After Strong Q3 Results and Bullish Forecast Tesla (NASDAQ: TSLA) surged almost 22%, marking its biggest one-day gain since 2013. The electric vehicle maker posted stronger-than-expected third-quarter earnings and projected 20-30% sales growth for next year, surprising investors.

Quarterly Earnings Update So far, 29% of S&P 500 companies have reported results this quarter, with 81% beating earnings estimates, according to data from LSEG.

Jobless Claims Fall In economic news, new applications for U.S. unemployment benefits unexpectedly fell last week by 15,000, signaling ongoing strength in the labor market.

US 500

The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.

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