FUNDAMENTAL AND TECHNICAL ANALYSIS REPORT – 01 November 2022

01 Nov 2022

RBA Hikes Interest Rates by 25 Bps, Cuts Growth Outlook

Asian shares rose and bond yields firmed in early trade on Tuesday. The Shanghai Composite is up 1.18% at 2,927.71. Overall, the Singapore MSCI is up 0.97% at 280.70. Over in Hong Kong, the Hang Seng Index is up 4.26% at 15,266.00. In Japan, the Nikkei 225 is up 0.33% at 27,640.00, while the Topix index is up 0.49% at 1935.50. South Korea’s Kospi is up 1.61% at 2,330.44. Australia S&P/ASX 200 up 1.65% at 6976.90.

Top News of the Day:

The Reserve Bank of Australia (RBA) raised interest rates as expected on Tuesday, but also hiked its inflation forecast and trimmed its GDP outlook as it flagged more headwinds for the economy from increased price pressures and rising rates.

The RBA raised its target cash rate by 25 basis points (bps) to 2.85%, bringing interest rates to their highest level in nine years.

Market Summary as per 31/10/2022:

European equities Monday closing. The DAX futures contract in Germany traded up 0.08% at 13,253.74, CAC 40 futures down 0.10% at 6266.78 and the UK 100 futures contract in the U.K. up 0.66% at 7094.52.

In the U.S. on Wall Street, the Dow Jones Industrial Average closed down 0.39% at 32732.96. The S&P 500 down 0.75% at 3871.97 and the Nasdaq 100 down 1.22% at 11405.57, NYSE closes down 0.33% at 14747.02.

Top Market News Today:

In the Forex market, GBPUSD up 0.60% at 1.1529. The USDJPY down 0.36% at 148.154. The USDCHF down 0.13% at 0.9993. EURUSD up 0.50% at 0.9926, EUR/GBP down 0.12% at 0.8608. The USD/CNY down 0.43% at 7.2700 at the time of writing.

In the Commodity market U.S. Gold futures up 0.57% at $1,642.14. Elsewhere, Silver futures up 2.27% at $19.538 per ounce, Platinum up 1.19% at $935.50 per ounce, and Palladium up 1.66% at $1867.06.

Crude Oil up on Tuesday; Brent Crude Oil up 1.62% at $93.71 per barrel while U.S. West Texas Intermediate (CLc1) up 1.66% at $87.06.

In the Cryptocurrency Markets, Bitcoin at 20555.00 up 0.86%, Ethereum up 1.79% at 1594.00, Litecoin at 55.07 up 0.05%, at the time of writing.

Top Market Segment to Watch Out Today:

3M Co.: Independent Mexican union La Liga has won the right to represent workers at a 3M Co plant, authorities said on Monday, marking a second victory for the fledgling group at a pivotal moment for workers to take on entrenched interests.

Economic News:

US: In the worst year for U.S. Treasuries ever, it is the ultra-long end that investors should be most worried about.

Yields across the curve are at multi-year peaks as the Federal Reserve has yanked up interest rates to battle 40-year high inflation, while duration risk – a bond’s increased sensitivity to price changes over longer time frames – is also weighing heavily on the long end.

Crucially though, ‘term premium’ is back. This is the compensation investors demand for taking on interest rate risk over a bond’s lifetime, or put another way, for buying a longer-dated bond rather than rolling over shorter-term debt.

After decades of decline, even into negative territory, term premium is rising again. A secular shift may be underway.

There’s no fixed formula for calculating it, so estimates can vary significantly. But three different Fed models all tell the same story: whether it’s due to fears over inflation, liquidity, or supply and demand risks, investors want to be paid a higher rate of interest for lending to Uncle Sam long term.

Euro Zone: Britain still faces a 40 billion pound ($46 billion) budget hole that will need to be filled by tax rises as well as spending cuts, despite recent U-turns on measures proposed during Liz Truss’s short-lived premiership, a think tank said on Tuesday.

The Resolution Foundation, which focuses on issues facing low- and middle-income households, said new Prime Minister Rishi Sunak and his finance minister Jeremy Hunt faced unappealing choices ahead of a budget statement due on Nov. 17.

“While the recent focus has been on conditions improving post-Trussonomics, the central picture remains one of a weaker growth, higher borrowing costs and expensive tax cuts that have left a fiscal hole of at least 40 billion pounds to fill,” the Resolution Foundation’s research director, James Smith, said.

Britain’s Office for Budget Responsibility last published borrowing forecasts in March, since when the growth outlook has weakened due to surging energy prices, while interest rates have risen in Britain and globally, pushing up borrowing costs.

The Resolution Foundation estimated that tax rises and spending cuts of at least 30 billion pounds would be needed to ensure debt was falling as a share of gross domestic product by the 2026-27 financial year.

Top Economic Releases Today:

U.S. ISM Manufacturing PMI (Oct) today at 10:00 this time estimated 50.00, previously which was 50.90.
30 this time estimated 45.80, previously which was 45.80.
NEW ZEALAND Employment Change (QoQ) (Q3) today at 17:45 this time estimated 0.5%, previously which was 0.0%.