Our thoughts and prays remain will all the innocent in all conflicted regions.
The Israeli – Hamas war continues unabated but there is hope in current negotiations, but it still feels that there is no end in sight. New House of Representatives leader Mike Johnson, with one day left before the US Government runs out of money shows the way with an agreement to keep the US government in business. The stop gap measures continue pushing the problem down the road but not trying to fix it. Eventually, this will be a problem. This is a little disappointing. US Stocks remain in a tight range with bulls and bears at the bid trying to prove their way. The Dow etched out another small weekly gain, the third in a row as economic data sets the scene for the Fed to back down on any more increases and perhaps leaning to more of a dovish feel. Closer to home the RBA puts rates up for the 13th time since May 2022 breaking the four-month hiatus with traders and houseowners hopefully this will be the last one in the current cycle. The current rate stands at 4.35%.
First, the War in Middle East. Negotiations are currently underway for a 5 day cease fire to enable important supplies to get through and to evacuate those citizens that require urgent medical attention. Israeli leaders and pro-Israeli governments are resolute in trying to resolve the matter in their favour and hence the war will continue until their goal is achieved. Comments from Biden late last week intermated that any solution will be final. Reading between the lines, we suggest that this means an Israeli victory at all costs. Biden has asked Congress for an additional US105 billion to help fund Israel. Money that will be spent on defence contracts and weaponry. This should translate into more demand for strategic commodities, more support to the defence industry and ultimately the US economy.
Last week’s economic news in the US showed that Inflation was softer, Industrial and Manufacturing Production were all weaker. What does this tell us? The Inflation rate (yoy 3.2%) and Core Inflation rate (yoy 4%) all marginally softer. Importantly, the Inflation rate of 3.2% came down from 3.7%. Energy costs dropped 4.5% (vs -0.5% in September), with gasoline declining 5.3%, utility (piped) gas service falling 15.8% and fuel oil sinking 21.4%. On the flip side, Industrial Production fell off a cliff at -0.7% mom from previous read of -0.2% and Manufacturing Production -0.7% mom from a previous print of 0.2%. This data will provide an important lead to the Federal Reserve that there is no need to pursue a hawkish stance on rates and indeed given the weakness in production data perhaps a dovish tone could evolve. But do not expect this to happen until some resolution on the Middle East is on the cards as these numbers could be easily reversed if the conflict spreads. The FOMC minutes are due this Wednesday so will be interesting to see the final wording and hints as to the tightening cycle ending.
It was good to see the new speaker to the House Representatives Mike Johnson, getting the funding bill together. Although it is another “stop gap” measure , but this time in two phases. He is kicking the deficit issue down the road again. Mike Johnson was tipped to be a hardliner some in his party are disappointed with the outcome as the deficit issue has not been addressed, $33,600,000,000,000 of debt or 129% of debt to GDP is simply unsustainable. Albeit the investors seem to be content with the strategy and the equity markets have not been spooked even though we have seen US credit ratings lowered by Moody’s who in a statement said that “large scale fiscal deficits and a decline in debt affordability” where the reasons behind the move.
This week sees RBA Minutes out locally on Tuesday, and prior to this we have the new Governor Bullock on the wires, explaining away her current position on why they moved on interest rates. The minute will also help to provide some more reasoning as to why they moved on interest rates and what we could expect going foward. Then later in the week we have minutes from the last FOMC meeting where we are expecting some lead on the dovish tone that we can expect boing forward. The most import piece of data due is the US Durables Goods Orders on Thursday. The previous read was 4.7% and consensus is -3.2% adding weight to the dovish feel from the FED.
On our positions, we are neutral on the US Equity markets, we had a look at going short giving the weight of negative news, however, were stopped out with small losses. The market still looks heavy so looking for then correct time and place to…
AUD/USD … and AUD/CHF …positions have had a good lift, and we are close to becoming back in profit. We continue to like these trades and feel that we have a major low in place.
Trade Focus:
NASDAQ: Its pretty hard to ...
Technical Analysis:
From a technical perspective we are 5% off a record high which occurred in Nov 21. … is resistant. If it broke above this level and failed to push through in a few trading sessions, then this would signal a major top. The preferred outlook is a breach and pull back over the coming few weeks. You need to be close to the …
Support …
Resistance …
Momentum …
