U.S. Indexes added to recent gains despite early weakness following the government shutdown. Outperformance was in the NASDAQ 100 while sectors were more mixed. Health Care was the clear laggard as the sector continues to benefit from President Trump’s clarification on the sector, with the latest agreement with Pfizer (PFE) showing the administration is not going to be as aggressive against pharmaceutical companies as initially thought, particularly after Trump’s triple-digit tariff threat. On the flip side, materials underperformed with weakness in some chemical names like LYB and FMC, weighing. T-notes bull steepened in response to the soft ADP data, which bolstered Fed rate cut bets with markets now fully pricing in a 25bp rate cut in October. Upside was also seen ahead of the data on the government shutdown, which supported havens in general, particularly the Japanese Yen and Gold, albeit gold prices fell off its best levels on likely profit taking, with the data having little impact on the yellow metal. Elsewhere, the ISM Manufacturing PMI was largely in line with expectations, remaining in contractionary territory, but internals were more mixed. In FX, the Dollar Index was lower while the Yen outperformed, but the Swiss Franc lagged. Crude prices were lower, likely weighed on by Saudi Aramco’s surprise LPG price cut, which could help bolster its sales amid increasing competition. Note, on Thursday, the weekly jobless claims data will not be released due to the government shutdown. Attention will turn to speeches from the Bank of Japan’s Governor Ueda overnight, Treasury Secretary Bessent this afternoon, and Fed’s Logan later on. The ADP Private Payrolls report, which has extra focus this month due to the government shutdown, was overall very weak. Private employers cut 32k jobs in September, well below the consensus of +50k and the most pessimistic forecast of +23k, while the prior was revised down to -3k from +54k. It also announced it conducted its annual preliminary rebenchmarking of the report in September based on the FY 24 QCEW results, which led to a reduction of 43k jobs in September versus the pre-benchmarked data. On wages, the median change in annual pay for job stayers rose to 4.5% from 4.4%, while for job changers it fell to 6.6% from 7.1%. ADP’s Richardson says that “Despite the strong economic growth we saw in the second quarter, this month’s release further validates what we’ve been seeing in the labor market, that U.S. employers have been cautious with hiring.” The headline ISM Manufacturing PMI rose to 49.1 from 48.7, a touch above the 49.0 forecast, but remained in contractionary territory for the seventh consecutive month. Within the report, New Orders fell to 48.9 from 51.4, while the Backlog of Orders Index rose to 46.2 from 44.7. The Supplier Deliveries index rose to 52.6 from 51.3, indicating slower deliveries than in August. The Prices Paid component eased to 61.9 from 63.7, beneath the 63.2 forecast. Oxford Economics highlights that this may suggest the peak impact from tariffs on prices may have passed, but sectoral tariffs could send this higher again. Employment rose to 45.3 from 43.8. Summarising the report, ISM’s Spence says, “In September, U.S. manufacturing activity contracted at a slightly slower rate, with production growth the biggest factor in the 0.4-percentage point gain of the Manufacturing PMI”. However, the combined drops in the New Orders and Inventories indexes (4.2 points) exceeded the increase in the Production Index (3.2), rendering the Manufacturing PMI improvement negligible. Last month’s increase in new orders seems to have flowed through to production but does not appear to be sustainable given the subsequent drop in new orders in September. On tariffs, some respondents said that profits are down and tariffs are being shouldered by all companies in their space (transportation and equipment). A respondent in the chemical products business said tariffs are still causing issues with imported goods into the US, not only on cost concerns but also on documentation issues. A respondent in miscellaneous manufacturing said that “Steel tariffs are killing us.” Overall, Oxford Economics writes that lower interest rates, reduced political uncertainty and a fiscal boost from the One Big Beautiful Bill will take time to filter through the manufacturing sector. Fed Member Logan reiterated her known hawkish stance, saying that the Fed will be cautious in any further reductions. The Dallas Fed President said financial conditions are a tailwind now, and this is evidence that policy is only modestly restrictive. She added that it is not clear how much further the Fed can cut before hitting neutral. The Dallas Fed President said the US may need further labour market slack to reach the inflation target of 2%. On inflation, said expectations cannot be taken for granted, and excluding tariff impacts, inflation may be as high as 2.4%, driven by non-housing services. Elsewhere, Oil closed lower by 0.66% while Gold was flat after a volatile session that witnessed plenty of two-way volatility.
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For anyone following my Platinum Service it made 490 points yesterday on the first trading session of October after closing September with a gain of 3774 points after ending August with a gain of 3362 points after closing July with a gain of 3753 points after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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