7 Oct 2022

Last night, the three major U.S. stock indexes fluctuated lower. As of the close, the Dow fell 1.15%, the Nasdaq fell 0.68%, and the S&P fell 1.02%. The yield on the 10-year U.S. Treasury bond rose 1.999% to close at 3.826%, a difference of about -44 basis points compared with the yield on the two-year Treasury bond. The VIX, the fear index, rose 6.9%. Brent crude closed up 1.21%. Spot gold closed down 0.22% at $1,712.74 an ounce. The dollar index remained high, closing at 112.28.

The ECB meeting minutes showed inflation was too high and likely to be above the Governing Council's target for an extended period of time; most members expressed a preference for a 75 basis point increase in the ECB's key interest rate. Most see interest rates still "significantly" below neutral, and in July the median inflation forecast for the next three years was 3%.

The number of layoffs at challenger companies in the United States in September was 29,989, compared with the previous value of 20,485. U.S. employer layoffs rose 46% month-on-month in September and 68% year-over-year. September marked the fifth time so far in 2022 that the number of layoffs was higher than a year earlier. "The labor market is starting to show some cracks. Hiring is slowing and layoffs are starting to happen," said Andrew Challenger, senior vice president at Challenger. In September, employers announced plans to hire 338,014 workers, the lowest September total since 2011, when 76,551 were announced.

A cooling housing market and interest rate hikes by the Federal Reserve are causing mortgage staff layoffs at banks and lenders. Fears of a recession have led to heightened uncertainty, and companies across industries are beginning to reassess their workforce needs. Typically, both the retail and transportation/warehousing industries are ramping up hiring for the holiday season, announcing their plans in September. The lower figure suggests that companies that typically hire seasonal workers are waiting to see if consumers will spend more during the holiday season.

U.S. initial jobless claims rose to 219,000 in the week to Oct. 1, snapping a two-month streak of declines and beating expectations for 203,000. Although still at historically low levels, it is the latest sign that labor demand may be starting to slow. A sustained rise in jobless claims would signal sluggish spending across sectors, and uncertainty about the economic outlook is prompting some companies to lay off workers. Still, the number of applications remains low, continuing to show a strong labor market. Nonfarm payrolls are due on Friday, and the September jobs report is expected to show an increase of 260,000 jobs. While it would be the lowest monthly number of new jobs added since the decline in late 2020, it was still a strong increase that points to a strong labor market. Unemployment is expected to remain near 50-year lows and average hourly earnings are expected to rise again strongly.

The EU officially approved the eighth round of sanctions against Russia, which will take effect on October 7. It is reported that the new sanctions plan will include a ban on the transportation of Russian oil exceeding the oil price cap to third countries by sea and a ban on related services; and expand the sanctions to Kherson and Zaporozhye. In its autumn forecast, the German government downgraded its 2022 growth forecast to 1.4% and projected a recession in 2023 with GDP growth of -0.4%.

Fed Kashkari said that there is a risk of excessive interest rate hikes, but is not worried about stagflation, and the Fed has more work to do on inflation. Fed Governor Cook said restoring price stability may require sustained rate hikes followed by a period of restrictive rate policy. Fed Evans believes that the reduction of the balance sheet will be completed within three years, and the next meeting of the Fed will discuss whether to raise interest rates by 50 basis points or 75 basis points. Federal Reserve Governor Waller said Friday's jobs report may not change the view that the Fed should be 100% focused on reducing inflation, with rate hikes expected early next year.

According to CME's "Federal Reserve Watch": The probability of the Fed raising interest rates by 50 basis points to the range of 3.50%-3.75% in November is 31.3%, and the probability of raising interest rates by 75 basis points is 68.7%; the probability of a cumulative rate hike of 100 basis points by December The probability of a cumulative rate hike of 125 basis points is 60.6%, and the probability of a cumulative rate hike of 150 basis points is 15%.

Apple fell 0.66% as the Paris Court of Appeal lowered the 1.1 billion euros antitrust fine imposed on Apple in 2020 to 372 million euros. .

Microsoft fell 0.97% after Brazil approved Microsoft's $68.7 billion acquisition of Activision Blizzard.

Google rose 0.02% after it was rumored that Google plans to double its smartphone sales in 2023 compared to this year.

Amazon fell 0.54% as it plans to hire 150,000 workers for the U.S. holiday season despite expected weaker sales.

Tesla fell 1.11%, Musk and Twitter may reach an agreement before next Monday; according to S&P: Tesla's rating was upgraded from BB+ to BBB due to improved production conditions, with a stable outlook.

According to market sources: Porsche's valuation rose to 82.6 billion euros, surpassing the 77.7 billion euro valuation of parent company Volkswagen.

Shell fell 4.35%, expecting Q3 results to be weighed down by a halving of refining margins, a decline in chemical margins and weak natural gas trading.

Peloton rose 4%, and will lay off another 500 people to make a final effort for the transformation. The CEO said that if the transformation fails, the company may not be able to survive independently.

General Electric fell 0.6 percent, cut 20 percent of its U.S. onshore wind workforce and plans to cut staff in Europe and the Asia-Pacific region.

The preliminary data of AMD's third-quarter revenue was about 5.6 billion US dollars, and it was estimated to be 6.71 billion US dollars. It fell nearly 8% after the market and closed down about 3.74%.

Sources from: Investing.com; Reuters.com

Louis Yap

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