2 Nov 2022

The three major U.S. stock indexes opened higher and lower last night. As of the close, the Dow fell 0.24%, the Nasdaq fell 0.89%, and the S&P fell 0.41%. The U.S. 10-year Treasury yield rose 0.049% to close at 4.054%, about -50 basis points lower than the two-year Treasury yield. The VIX, the fear index, fell 0.27%. Brent crude closed up 2.02%. Spot gold closed up 0.87% at $1,647.95 an ounce. The dollar index remained high, closing at 111.56.

The October PMI reading of 50.4 showed a subdued start to the final quarter of 2022, as new orders from U.S. manufacturers saw a new round of sharp declines. As prices rose further and the dollar strengthened, customers were more hesitant and domestic and international demand weakened. So it's measures to clear the backlog, not the influx of new orders, that's driving the latest round of production pick-up. Confidence in the outlook waned as underlying data also highlighted efforts by companies to cut costs and adjust to a weaker demand environment in the coming months. Input purchases have fallen sharply, employment elasticity has been dampened, and job creation has slowed to very low levels.

On the positive side, input costs have grown at their slowest pace in nearly two years, and there are signs of fewer supply chain disruptions. However, lower demand for inputs is a contributing factor. The slowdown in cost increases, however, was reflected in a slowdown in output expenses as companies tried to pass on cost savings where possible in an attempt to boost sales.

The U.S. ISM manufacturing PMI recorded a record 50.2 in October, the lowest since May 2020. U.S. manufacturing continued to expand, but at the slowest pace since the post-coronavirus recovery began. With the rate of new orders falling from the previous five months, the October index reflects that companies are preparing for a potential drop in demand in the future. Weakness in the European economies and elsewhere continued to limit the expansion of new export orders and had a negative impact on the new order rate. The report is further evidence that fears of a global recession are mounting as central banks, including the Federal Reserve, step up efforts to rein in inflation.

U.S. jobs unexpectedly rose in September, suggesting labor demand remains strong despite the Federal Reserve's sharp interest rate hikes. The Fed is expected to raise rates by another 75 basis points. The Fed is now working to cool labor demand and the broader economy to bring inflation down to its 2% target. European Central Bank Governing Council member Nagel said there is still a long way to go to raise interest rates.

US energy security envoy Hochstein said the US needs to buy back 200 million barrels of oil to replenish the Strategic Petroleum Reserve (SPR). The UAE and the US have signed a strategic agreement to produce 100 gigawatts of clean energy and will invest $100 billion in clean energy projects. The survey showed that OPEC's crude output rose by 30,000 bpd in October to 29.98 million bpd after OPEC committed to a symbolic output cut last month. Russia's oil production in October was 9.9 million bpd. Russian Deputy Prime Minister Novak said that Russia has begun to exchange oil products with Iran, and the list of products will be further expanded. The Bank of England completed its first sale of bonds bought under its quantitative easing programme, selling £750 million of 3-7-year government bonds in its first auction.

The Atlanta Fed's GDPNow model expects U.S. fourth-quarter GDP growth to be 2.6%, compared with 3.07% expected on October 28. White House economic adviser Bernstein said U.S. President Joe Biden supports the Federal Reserve to tighten policy this year. (Correction by foreign media, not "US President Biden supports the Fed's policy shift.") Indian government: Increase the windfall profit tax on diesel exports from 12 rupees to 13 rupees per liter; increase the windfall profit tax on jet fuel exports from 3.50 rupees per liter to Rs 5 per litre; cut export windfall profits tax on domestically produced crude oil from Rs 11,000 per ton to Rs 9,500 per ton. Changes to the windfall profits tax on petroleum products will take effect from 2 November.

Apple fell 1.75%. Since the launch of new products in September, iPhone sales in China have declined significantly.

Microsoft fell 1.71% after it was rumored that the company did not propose remedies to European regulators for its acquisition of Activision Blizzard.

Google fell 4.39% and was punished by antitrust. Google will suspend the implementation of the Google Play billing system in India.

Tesla rose 0.12% and plans to start mass production of the electric pickup Cybertruck by the end of 2023; Tesla is rumored to send employees from Shanghai to the California factory to help increase production. Musk said that Twitter Blue subscription fees will increase by 60%, and certified users may pay additional fees.

Johnson & Johnson fell 0.51% to buy cardiac device maker Abiomed for $16.6 billion.

AstraZeneca rose 1.77%, and the new crown vaccine obtained the EU's full marketing authorization.

TSMC rose 0.05%. Construction of its Arizona wafer fab started about 18 months ago. Construction is progressing as expected and mass production will begin in 2024.

Financial reporting

Toyota Motor fell 2.63%, its Q2 performance was far less than expected, and it lowered its full-year sales guidance.

Pfizer rose 3.14%, Q3 revenue and net profit double expectations, and the annual revenue guidance is 99.5-102 billion US dollars.

Uber rose 11.97%, its Q3 performance exceeded expectations, and its net loss narrowed significantly; the number of monthly active platform consumers increased by 14% year-on-year to 124 million.

Eli Lilly fell 2.63%, and its Q3 performance exceeded expectations; it lowered its full-year revenue and profit guidance.

Sony rose 9.69%, and its Q2 operating profit in fiscal 2022 exceeded expectations, slightly raising its full-year performance guidance.

NXP rose 3.95%, Q3 revenue EPS both exceeded expectations, and revenue guidance was basically in line with expectations.

AMD once rose by more than 6% after the market, its Q3 revenue EPS both exceeded expectations, and its Q4 revenue guidance was lower than expected. Benefiting from the delay in mass production of Intel's new products, AMD estimates that the proportion of x86 Server CPUs in 2023 is expected to exceed 22%.

Sources from: Investing.com; Reuters.com

Louis Yap

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