11 Nov News Update

Last night, the three major US stock indexes opened higher and moved higher, and most sectors such as chip stocks, cruise stocks, Chinese concept stocks, and star technology stocks collectively strengthened. As of the close, the Dow rose 3.7%, the Nasdaq rose 7.35%, and the S&P rose 5.54%. The yield on the 10-year U.S. Treasury bond fell 6.803% to close at 3.822%, a difference of about -51 basis points compared with the yield on the two-year Treasury bond. The fear index VIX fell 9.81%. Brent crude closed up 1.13%. Spot gold closed up 2.84% at $1,755.17 an ounce. The dollar index remained high, closing at 107.84.

The annual rate of the U.S. unseasonably adjusted CPI recorded 7.7% in October, falling below 8% again after a lapse of seven months, the smallest increase since January 2022. After the data was released, the 2-year Treasury bond yield fell 16 basis points, and the Nasdaq futures rose more than 3%, indicating that when the Fed confirms that it will slow down the pace of interest rate hikes or the rate hike cycle is about to end, risk assets will gain across the board.

The Wall Street Journal's Nick Timiraos, the "Fed Buzzer", said the October inflation report could see the Fed raise interest rates by 50 basis points next month as planned. Officials have signaled they are somewhat insensitive to recent inflation data and want to slow the pace of rate hikes. The interest rate swap market lowered expectations for a 75 basis point rate hike by the Federal Reserve in December. Traders in U.S. short-term interest rate futures now expect the federal funds rate to peak at 4.75%-5% by March 2023. Traders are pricing in an 80% chance the Fed will raise rates by 50 basis points in December, compared with about a 52% chance ahead of the inflation report.

U.S. jobless claims rose to 225,000 in the week to Nov. 5, but remained near record lows, showing many employers continued to keep workers. Despite recent announcements of layoffs and hiring freezes by some companies, jobless claims remain low, especially in the tech sector. Meta said this week that it would cut more than 11,000 jobs, or 13% of its workforce, in a sign of the growing competitive and regulatory challenges Meta faces. Layoffs in tech and other interest-rate-sensitive sectors have yet to show up in government economic data. That likely reflects a time lag between companies and the data in the Labor Department report, as well as the overall strength of the labor market, as layoffs in the tech sector account for only a fraction of overall employment activity.

Several Fed officials made intensive speeches: Fed Harker said that raising interest rates by 50 basis points is still significant. It is expected that the U.S. economy will grow by 1.5% in 2023, and the unemployment rate will peak at 4.5%. Pause rate hikes. Fed's Logan said he believes the pace of rate hikes may soon be slowed so the Fed can better assess developments in financial and economic conditions. Fed's Daly said now is the time to reduce the pace of rate hikes, but there may be more in the future. Fed Mester said that the main risk to inflation is that the Fed will not raise interest rates enough, and the Fed needs to move forward with raising interest rates to cool inflation. Fed George said it was important that rate hikes did not increase volatility in financial markets; consumer prices were falling but remained uncomfortably high; and the Fed had not yet decided to sell assets on its balance sheet. In addition, US President Biden also said that the United States is making progress in containing inflation; will work with Democrats or Republicans to provide more breathing space for American families, but will oppose any efforts to cancel the agenda or worsen inflation.

House Democrats are scheduled to hold a leadership election on November 30. U.S. 30-year fixed-rate mortgages rose to 7.08% from 6.95% a week earlier. Fitch expects the federal funds rate to rise by 50 basis points to 4.5% in December, and said the Fed and European Central Bank policy rates are now likely to peak at a later date, higher than Fitch expects in September 2022. The U.S. Treasury Department will auction $57 billion in three-month Treasury notes and has said it will accept foreign exchange intervention under certain circumstances. The Bank of England announced a demand-oriented temporary government bond purchase lifting program, which will provide government bonds to interested buyers from November 29.

According to CME's "Federal Reserve Watch": The probability of the Fed raising interest rates by 50 basis points in December has increased significantly to 80.6% (56.8% yesterday), and the probability of raising interest rates by 75 basis points is 19.4% (43.2% yesterday); by February next year The probability of a cumulative rate hike of 75 basis points is 50.7%, the probability of a cumulative rate hike of 100 basis points is 42.1%, and the probability of a cumulative rate hike of 125 basis points is 7.2%.

Apple rose 8.9% as Samsung plans to expand production of QD-OLED panels in order to secure orders from Apple.

Microsoft rose 8.23%, AMD rose 14.27%, Microsoft Azure and Oracle Cloud will use AMD's 4th generation EPYC chips for cloud computing.

Google rose 7.75% as Spotify and Google began offering billing options for users to choose from.

Amazon rose 12.18 percent, its biggest one-day gain since Feb. 4, as it plans to launch a cost-cutting review.

Tesla rose 7.39%, Tesla’s Texas factory began to recruit: preparing for mass production of Cybertruck pickup trucks next year; it is reported that Tesla’s Shanghai super factory produced 87,700 electric vehicles last month; Musk warned that push Trump could lose billions of dollars next year.

TSMC rose 8.98%, and its October revenue was NT$210.266 billion, an increase of 1% month-on-month and a year-on-year increase of 56.3%, the highest in the same period over the years and the second highest in a single month.

Rivian rose 17.42%, Q3 revenue was lower than expected, net loss expanded, and production increased by 63% year-on-year, reiterating its 2022 production guidance of 25,000 units.

Boeing rose 5.24% as Malaysia Airlines is considering an order for 25 Boeing 737 Max jets after it had confirmed an order for 25 single-aisle planes.

Sources from: Investing.com; Reuters.com

Louis Yap

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