Flat start

Flat start to trading in a week that will be dominated by central banks. Equities not doing much, dollar up to the highest in a week, gold lowest in 10 days, US 10yr yields at 4.05%. The cries of ‘pivot, pivot, pivot’ are ringing out.

Covid China

Chinese manufacturing activity shrank in October, with the official PMI down to 49.2 from a reading of 50.1 in September. Covid lockdowns continue to hamper activity in the world’s second-largest economy. Meanwhile German retail sales were better than expected. Citi sees a 50% chance of a synchronized global recession next year.

Best month since ‘76

The FTSE 100 is on course to rise a pretty meagre 2% for October. I say meagre only as the Dow Jones industrial average is on course for a gain of more than 14%, which would be its best month since 1976. The DAX and FTSE MIB are both up around 9% during October. Despite some terrible tech earnings the Nasdaq Composite is still riding a gain of nearly 5% for the month; whilst the S&P 500 is up almost 9%. 

Earnings ahoy

Choppy earnings haven’t hit the bandwagon too hard. Mainly that’s because just about everyone expects the Fed to go a little or a lot slower with hikes. The pivot narrative seems to be winning out right now. It’s also a reaction to the terribly oversold September when markets got a spook or two and yields surged. This week earnings come from Barrick Gold, Moderna, Amgen, Block Inc, Coinbase, Illumina, PayPal, Starbucks, Twilio, Virgin Galactic, Estee Lauder, Etsy, Liberty Global, Qualcomm, Roku, Eli Lilly, Newmont Corp, Pfizer, Advanced Micro Devices, Airbnb, Mondelez, Uber.

Pivot again?

Pantheon takes the pivot angle, noting there are “unambiguous signs of weakening labor demand, falling business investment intentions, falling rents, and collapsing support for overstretched profit margins... change is coming ... making it much more likely that the Fed’s final hike will be in December”. A lot is riding on the market interpretation of what the central banks do next. Noteworthy that ECB officials said on Friday they were surprised that the market saw last week’s 75bps hike as dovish…everyone is seeing a pivot when it’s not there. RBA, Fed and Bank of England all in action this week.