U.S. Equity Markets closed higher on Tuesday led by the 0.5% gain in the NASDAQ 100. Markets managed to reverse the dismal US consumer confidence-induced downside, which also saw Treasuries reverse their initial risk-on losses and spurred the Dollar selling for the duration of the US afternoon. Sectors closed mixed, although Financials was the distinct laggard and weighed on by Visa (V, -5.4%) after being sued by the Department of Justice for an antitrust matter. Materials outperformed, buoyed by upside in ALB, CLF, and STLD (and many others), after China unveiled a raft of stimulus measures. Briefly recapping, the PBoC cut the RRR and 7-day reverse repo rate, whilst also announcing measures for the property sector and stock market, with the actions likely driven by recent domestic and external factors facing the Chinese economy, although it is yet to be seen if they have any longer lasting effect. In the FX space, the Dollar was heavily sold and was already weaker heading into US consumer confidence, but the disappointing release accentuated the move, seeing all G10 FX peers gain, with Antipodeans outperforming. Safe havens, the Swiss Franc and Japanese Yen even pared initial losses to finish firmer. As such, precious metals were bid as was the crude complex, albeit the latter had a myriad of bullish impulses with the most important being the aforementioned China stimulus, although the ever-escalating Middle Eastern tensions cannot be ignored. For the record, there was a pretty average 2 Year Treasury Auction while Richmond Fed manufacturing declined, but services rose. On the Fed footing, 25bps dissenter Bowman echoed a lot of the arguments she made in her speech on Friday, where she said she did not want a 50bps cut to send a message the Fed has declared victory on inflation. Ahead, there is Micron (MU) earnings after-hours on Wednesday, a deluge of Fed speak on Thursday with the highlights being Powell and Williams, ahead of PCE on Friday. Headline Consumer Confidence saw its largest drop since August 2021 as it fell to 98.7 from 105.6 (revised up from 103.3) in September, below the anticipated 104 and also the bottom end of the forecast range, 101. The surprising downturn primarily stemmed from the 10.3 drop in the Present Situation Index to 124.3, although the fall in the Expectations Index weighed on Confidence (fell by 4.6 points to 81.7). The report noted consumer assessments of current business conditions turned negative while views of the current labour market situation softened further. For future conditions, consumers were more pessimistic about the labour market and less positive about business and future income. Chief Economist at The Conference Board Peterson added that “The deterioration across the Index’s main components likely reflected consumers concerns about the labour market and reactions to fewer hours, slower payroll increases, fewer job openings”. 30.9% of consumers said jobs were “plentiful,” (prev. 32.7%) whereas 18.3% of consumers said jobs were “hard to get,” up from 16.8% seen in August. The labour market differential between consumers saying jobs are plentiful versus hard to get fell to 12.6 (prev. 15.9). Six-month expectations saw 18.3% of consumers anticipate fewer jobs, up from 17.0%, while 13.0% expected their incomes to decrease (prev. 11.7%). Lastly, on inflation, average 12- Month inflation expectations increased to 5.2% (prev. 4.9%). Meanwhile, Richmond Fed Composite Manufacturing Index fell to -21 (prev. -19) in September. Of its three component indexes, shipments and employment decreased to -18 (prev. -15) and -22 (prev. -15), respectively, while new orders increased to -23 from -26. On the inflationary footing, prices paid rose to 3.36 from 2.45, but prices received dipped to 1.57 from 1.87, with the forward-looking expectations showing the opposite (paid falling, received rising). Within the release, firms grew more optimistic about local business conditions, as the index lifted to -18 from -24, but the index for future local business conditions notably declined into negative territory, -18 from 7. The report adds that the future indices for shipments and new orders both decreased but remained in positive territory, suggesting that firms continued to expect improvements in these areas over the next six months. The vendor lead time index remained at -4 in September. On balance, firms continued to report declining backlogs in September as that index remained negative. Elsewhere, Oil closed 1.5% higher while a weaker Dollar saw Gold close at a new all-time high with a gain of 1.2%.
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