The US dollar strengthens against the euro, yen and pound sterling in trading on Monday.
The market is waiting for the meeting of the Federal Reserve System (Fed), which will be held on November 1-2. Traders are confident that the US Central Bank will raise the base interest rate by 75 basis points (bp) following the results of the fourth meeting in a row. As a result, the rate will reach the level of 3.75-4% – the maximum since December 2007.
Traders will be closely watching Fed Chairman Jerome Powell’s statements to see if the US central bank intends to slow down the pace of policy tightening from December, writes the Financial Times newspaper. The global economy is weakening, and experts are already seeing signs that the peak of inflation in the United States has passed. In this regard, investors are increasingly expressing fears that the Fed may overdo it with raising rates and provoke an excessive recession in the economy.
The ICE-calculated index, which shows the dynamics of the dollar against six currencies (the euro, the Swiss franc, the yen, the Canadian dollar, the pound sterling and the Swedish krona), adds 0.08% on Monday, the broader WSJ Dollar – 0.19%.
The euro/dollar pair is trading at $0.9946 as of 8:55 am KSK, compared to $0.9966 at market close on Friday.
The US dollar against the yen rose to 147.92 yen against 147.48 yen in the previous session.
The pound dropped to $1.1592 from $1.1617 on Friday.
The Bank of England is also holding a meeting this week, its results will be made public on 3 November. Experts expect the British Central Bank to raise the base rate by 75 bp. – until 3%. The Bank of England did not raise the rate by more than 50 bp. since 1989, notes FT.
The dollar against the yuan edged up to 7.2698 yuan from 7.2525 yuan at market close on Friday amid weak economic data from China.
The Purchasing Managers’ Index (PMI) for China’s manufacturing industry fell to its lowest level since July of 49.2 in October from 50.1 a month earlier, according to data from the National Bureau of Statistics of the People’s Republic of China (GSO). An index value below 50 points indicates a decline in activity in the sector.
PMI services in China in October fell to 48.7 points, dropping below 50 points for the first time since May.
Stock indices of Western European countries do not show a single dynamics during trading on Monday.
Investors are evaluating the latest batch of statistics.
The composite index of the largest companies in the region Stoxx Europe 600 by 13:00 Moscow time fell by 0.03% and amounted to 410.64 points.
The British stock index FTSE 100 rose by 0.18%, the German DAX – by 0.06%, the Italian FTSE MIB – by 0.17%. Meanwhile, the French CAC 40 fell by 0.22%, the Spanish IBEX 35 – by 0.11%.
Retail sales in Germany in September rose by 0.9% compared to the previous month, according to the country’s Federal Statistical Agency (Destatis).
Analysts polled by Trading Economics had expected a 0.3% decline in retail sales last month.
Meanwhile, consumer prices in the eurozone rose 10.7% year-on-year in October, according to preliminary data from the European Union Statistics Office. Thus, inflation accelerated compared to 9.9% in September and again updated the maximum since the beginning of the calculations.
Analysts polled by Trading Economics had expected a less significant increase of 10.2%.
The economies of the 19 eurozone countries grew by 0.2% in the third quarter compared to the previous three months, according to preliminary data from the European Union Statistics Office. In annual terms, the eurozone GDP increased by 2.1%.
The dynamics of both indicators coincided with analysts’ expectations, according to Trading Economics.
Italy’s GDP rose 0.5% qoq in the third quarter, official statistics show. Growth slowed down compared to the previous quarter, when the rise was 1.1%. Meanwhile, the figure exceeded the expectations of analysts who did not expect changes in GDP, according to Trading Economics.
The Swiss National Bank (SNB, the country’s central bank) reported a large loss in the first nine months of this year amid rising franc and rising interest rates, which led to the depreciation of the bank’s investments in gold, foreign currencies and financial markets. Meanwhile, the bank’s shares are up 2.9%.
Shares of Credit Suisse Group AG strengthened by 4.2%. The Swiss bank has unveiled details of a $4 billion share offering plan.
Italian UniCredit SpA stock quotes are up 2.2%. The bank improved its net interest income forecast for 2022.
The biggest drop among Stoxx 600 components is German power generation company Verbund AG, which shed 4.5%.
Meanwhile, the growth leaders are the shares of the French manufacturer of pharmaceuticals Orpea S.A., which add 18.7%.
The United States, in contacts with the EU countries, put forward a proposal to apply the experience gained from the implementation of the export control regime in relation to the Russian Federation against China, Bloomberg reported on Monday, citing a number of anonymous sources.
“The United States, in contacts with European allies, has voiced the idea of learning from the export control regime used against Russia to fight China, according to people familiar with the matter,” the agency said.
The White House is “exploring some elements of similar information sharing and coordination in implementing measures to tighten US and EU restrictions” on exports to China, the sources said.
Such discussions come at a time when the EU and the US are discussing the agenda for the third meeting of the Trade and Technology Council scheduled for December 5, which serves as a forum for coordinating trade and technology policy between the EU and the US.
However, the sources note, the EU is not inclined to consider applying to the PRC the same approach that was used in relation to Russia. According to one source, the EU may look at the goods that Beijing is able to use to increase its military capabilities.
In turn, the US National Security Council denied plans to extend the export control regime against the Russian Federation to China, and the fact of discussions on this topic with European countries.
Bloomberg explains that export restrictions are considered potentially effective in slowing down China’s development amid global competition for technological supremacy.
On October 7, the US Department of Commerce banned the sale to China of the most advanced chips, as well as equipment, components and software for their production, with a special focus on technologies related to artificial intelligence and potential military applications. The restrictions affected the exports of other countries, which depend on similar American technologies and programs. Also, US citizens were forbidden to advise the Chinese side or provide it with other services in this area.
Subsequently, US Deputy Secretary of Commerce for Industry and Security Alan Estevez said that Washington expects an early agreement with the allies on their accession to these restrictions. However, authorities in the Netherlands, home of ASML Holding, a manufacturing equipment for the electronics industry, have expressed concern about the effect of new US restrictive measures.
Meanwhile, in mid-October, The Financial Times reported, citing an EU foreign policy document prepared for a meeting of the EU Foreign Affairs Council, that, in its opinion, China is a competitor that needs to be confronted, and that policy towards China should be tightened. A number of EU leaders later also warned against economic dependence on China.
Stock indices of the countries of the Asia-Pacific region (APR) started trading on Monday with growth.
The Hong Kong Hang Seng rose 1.4% by 8:20 am KSK, while the Chinese Shanghai Composite added 0.1%.
The leaders of the rise in quotations on the Hong Kong Stock Exchange are shares of BYD Co. Ltd. (+7.5%). The country’s leading new energy vehicle (NEV) maker posted a record third-quarter net profit due to a surge in sales in China.
The shares of the IT company Tencent Holdings Ltd are also actively rising. (+6.8%) and casino operator Sands China Ltd. (+6.3%).
Railway Papers China Railway Group Ltd. cheaper by 6.8%. The company posted a 4.5% increase in net income last quarter, but an adjusted figure excluding government subsidies and interest income fell 2.5%.
Stock quotes of the developer Longfor Group Holdings Ltd. fell by almost 21% on the news of the resignation of the chairman of the board of directors of the company, Wu Yajun.
The cost of securities of another developer China Vanke Co. fell by 6.2% after the publication of financial statements. The company’s net profit in July-September fell by 14%.
Shares of automaker Geely Automobile Holdings Ltd. rise in price by 1.8%. The company plans to spin off its electric vehicle division into a separate business and list its shares on the stock exchange.
The Purchasing Managers’ Index (PMI) in China’s manufacturing industry fell in October to the lowest since July 49.2 points from 50.1 points a month earlier, according to the State Bureau of Statistics of China (GSO). On average, experts expected it to drop to 50 points, Trading Economics notes.
An index value below 50 points indicates a decline in activity in the sector. PMI is a leading indicator of business activity as managers make purchases based on expected demand.
The Japanese Nikkei 225 rose by 1.6% by 8:30 am KSK.
The shares of electronics manufacturer Alps Alpine Co. have risen most significantly. (+16%), which produces spare parts for industrial equipment JTEKT Corp. (+10%) and equipment manufacturer Keyence Corp. (+8.4%).
Among the leaders of growth in the composition of the Japanese indicator, securities of Toyota Tsusho Corp. are also traded. (+8.3%) after the publication of financial statements. The company increased its net profit by 19% in the third quarter and improved its forecast for the year.
Retail sales in Japan in September increased by the most since May 2021 – by 4.5% compared to the same month last year, data from the country’s Ministry of Economy, Trade and Industry showed. Analysts, on average, expected a less significant increase of 4.1%, according to Trading Economics.
Industrial production in Japan in September fell by 1.6% compared to the previous month, according to preliminary data. The index recorded a decline for the first time since May. In August, it rose by 3.4%. The consensus forecast assumed a decline in the indicator by 1%.
The South Korean Kospi index rose 1% by 8:40 am KSK.
Quotes of securities of one of the world’s largest manufacturers of chips and electronics Samsung Electronics Co. grow by 4.2%. Shares of automakers Kia Corp. decrease by 0.5%, Hyundai Motor Co. – by 0.3%.
The Australian S&P/ASX 200 rose 1.2%.
The growth leaders were the shares of agro-industrial GrainCorp Ltd. (+7.9%), auto retailer ARB Corp. Ltd. (+7.5%) and medical Nanosonics Ltd. (+7%).
Retail sales in Australia rose 0.6% in September from the same month last year, according to the Australian Bureau of Statistics. The pace of recovery was higher than the consensus forecast of analysts in The Wall Street Journal at 0.4%. The index rose for the ninth month in a row.
Oil prices tumble on Monday on signs of a continued slowdown in economic activity in China due to tight quarantine measures to curb the spread of COVID-19.
The Purchasing Managers’ Index (PMI) for China’s manufacturing industry fell to its lowest level since July of 49.2 in October from 50.1 a month earlier, according to data from China’s National Bureau of Statistics (GSO).
An index value below 50 points indicates a decline in activity in the sector.
PMI services in China in October fell to 48.7 points, dropping below 50 points for the first time since May.
The cost of December futures for Brent oil on the London ICE Futures exchange by 8:15 am TST on Monday is $95.03 per barrel, which is $0.74 (0.77%) lower than the closing price of the previous session. As a result of trading on Friday, these contracts fell by $1.19 (1.2%) to $95.77 per barrel.
December futures expire at the close of the market on Monday. More actively traded January contracts fell by $0.69 (0.74%) to $93.08 per barrel.
The price of futures for WTI oil for December in electronic trading on the New York Mercantile Exchange (NYMEX) has decreased by $0.49 (0.56%) by this time, to $87.41 per barrel. By the close of previous trading, the value of these contracts fell by $1.18 (1.3%) to $87.9 per barrel.
As a result of last week, Brent rose by 2.4% per barrel, WTI – by 3.4%. The market closes the month with a rise of almost 10% due to the decision taken by OPEC + to cut production from November by 2 million barrels per day.
“Oil prices are likely to rise as OPEC+ cuts production and the EU embargo on Russian oil purchases (introduced in response to the continuation of the full-scale war unleashed by the Russian Federation against Ukraine – IF) will come into force on December 5,” notes the managing director Vanir Global Markets in Singapore James Whistler quoted by Bloomberg.
Prices of Ukrainian Eurobonds, which stabilized the week before last after a month-long 20% drop, resumed a slow decline last week, losing an average of 3% and dropping to a level near a historic low.
According to Bloomberg, at the short end, the losses were less than in its middle and at the long end, in particular, 2025 dollar Eurobonds fell in price by only 0.9%, to 21.9% of par, which corresponds to a yield of about 75.8% per annum. .
Eurobonds in dollars maturing in 2026-2030 were quoted at the end of last Friday in the range of 17.9-19.3%, which is on average 0.6 percentage points (pp) lower than a week earlier, and their current rates range from 63.5% to 42.7% per annum.
The price of the longest dollar securities maturing in 2031 and 2034-2035 fell the most – by an average of 4.6%, or 0.8 percentage points. – up to 16.7-16.5% of the face value, which corresponds to a yield of 38-35.4% per annum.
As for eurobonds in euros, bonds maturing in 2028 fell in price by 2.8% over the week, to 17.5% of par, and in 2032, by 4.7%, to 15.8% of par. Given the lower nominal interest rate compared to dollar securities, this corresponded to a yield to maturity of 50.6% in the first case and 34.2% per annum in the second.
At the same time, quotes of GDP-warrants remained at the same level last week – 26.2% of the conditional value.
