Gold price (XAU/USD) edges higher for the second straight day on Wednesday – also marking the fourth day of a positive move in the previous five – and touches a one-and-half-week high, around the $2,670 region during the Asian session. Retreating US Treasury bond yields drags the US Dollar (USD) away from over a two-month peak touched earlier this week and turns out to be a key factor underpinning the commodity. Furthermore, a turnaround in the global risk sentiment – as depicted by a weaker tone across the global equity markets – drives some haven flows towards the precious metal amid persistent geopolitical risks. 

Adding to this, elevated demand from central banks offers additional support to the Gold price. That said, firming expectations for a less aggressive policy easing by the Federal Reserve (Fed) and bets for a regular 25 basis points (bps) rate cut in November should limit any meaningful USD corrective decline. This, in turn, might hold back bulls from placing fresh bets around the non-yielding yellow metal. Moreover, reports that Israel will refrain from targeting Iran's oil and nuclear sites might contribute to capping gains for the XAU/USD, warranting some caution before positioning for any further near-term appreciating move.

Daily Digest Market Movers: Gold price benefits from softer risk tone, modest USD downtick

US Treasury bond yields fell for a second day on Tuesday as traders reacted to weaker-than-expected manufacturing data and easing inflation risks on the back of fall oil prices, boosting demand for the non-yielding Gold price. 

The New York Federal Reserve's Empire State Manufacturing Index fell following a surge to a 29-month high in September, to -11.9 in October, marking the weakest reading since May and indicating deteriorating conditions.

Easing fears of a supply disruption, along with a weaker demand outlook, drag Crude Oil prices to a two-week low, which is expected to reduce inflationary pressures and allow the US central bank to cut interest rates further. 

The markets, however, are pricing in a greater possibility of a smaller interest rate cut at the next FOMC policy meeting in November, which should underpin the US Dollar and keep a lid on any further gains for the XAU/USD. 

Meanwhile, San Francisco Fed President Mary Daly noted on Tuesday that the US central bank has made significant progress on tamping down inflation and sees one or two more rate cuts this year if economic forecasts are met.

Separately, Atlanta Fed President Raphael Bostic said that he doesn't see strong signs of a potential recession looming over the horizon as the US economy continues to perform well and that the inflation is heading back to 2%.

On Tuesday, Israeli Prime Minister Benjamin Netanyahu rejected the idea of a ceasefire in Lebanon, while the militant group Hezbollah threatened to widen its attacks, raising the risk of a further escalation of the conflict. 

The Biden administration has warned Israel that it faces possible punishment, including the potential stopping of US weapons transfers if it does not take immediate action to let more humanitarian aid into Gaza.

The market attention will be on the US economic releases – Monthly Retail Sales, Industrial Production, and the usual Weekly Initial Jobless Claims – and the Chinese macro data dump due later this week.

Technical Outlook: Gold price seems poised to surpass the all-time peak and conquer $2,700

From a technical perspective, any subsequent move up is likely to confront some resistance near the $2,685-2,686 region, or the all-time peak touched in September. This is closely followed by the $2,700 round-figure mark, which if cleared decisively will set the stage for an extension of a well-established multi-month-old uptrend amid positive oscillators on the daily chart. 

On the flip side, immediate support is pegged near the $2,650 area, below which the Gold price could slide to the $2,632-2,630 region. Any further decline is likely to attract some buyers and remain limited near the $2,600 round-figure mark. The latter should act as a key pivotal point, which if broken decisively might prompt some technical selling and pave the way for deeper losses.

Source: FXSTREET

The USD/INR pair remains near its all-time high at 84.14 as the Indian Rupee (INR) grapples with challenges stemming from foreign exchange outflows. This situation arises as traders evaluate the policy outlook for the Reserve Bank of India (RBI) in light of the recent inflation data from India.

India’s Consumer Price Index (CPI) rose to a nine-month high of 5.49% year-over-year in September, up from 3.65% in the previous month and well above market expectations of 5.0%. This increase represents the highest inflation rate recorded this year, surpassing the Reserve Bank of India’s (RBI) target of 4%. As a result, expectations for earlier rate cuts by the RBI have been tempered.

The Indian Rupee may receive support from falling Oil prices, given that India is the world's third-largest Oil importer. Crude Oil prices are facing downward pressure due to concerns about global demand, which have outweighed the impact of supply worries related to the ongoing uncertainty in the Middle East conflict.

Daily Digest Market Movers: Indian Rupee struggles due to foreign exchange outflows

The US Dollar (USD) continues to strengthen, bolstered by strong employment and Consumer Price Index (CPI) data that have lowered expectations for aggressive easing by the Federal Reserve (Fed). Markets are now projecting a total of 125 basis points in rate cuts over the next 12 months.

According to the CME FedWatch Tool, there is currently a 94.1% probability of a 25-basis-point rate cut in November, with no expectation of a larger 50-basis-point reduction.

On Tuesday, Federal Reserve Bank of Atlanta President Raphael Bostic stated that he anticipates just one more interest rate cut of 25 basis points this year, as reflected in his projections during last month's US central bank meeting. "The median forecast was for 50 basis points beyond the 50 basis points already implemented in September, according to Reuters.

On Monday, Foreign institutional investors sold a net total of 37.32 billion rupees ($444 million) in stocks, marking their eleventh consecutive session of net selling. In contrast, domestic investors net purchased shares valued at 22.78 billion rupees, per Reuters.

The Washington Post reported on Monday that Israeli Prime Minister Benjamin Netanyahu informed the United States (US) that Israel plans to focus on Iranian military targets rather than nuclear or Oil infrastructure.

Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari reassured markets late on Monday by reaffirming the Fed's data-dependent approach. Kashkari reiterated familiar Fed policymaker views on the strength of the US economy, noting continued easing of inflationary pressures and a robust labor market, despite a recent uptick in the overall unemployment rate, per Reuters.

Technical Analysis: USD/INR holds position above 84.00, close to all-time highs

The USD/INR pair hovers around 84.00 on Wednesday. Analyzing the daily chart shows that the pair is testing the lower boundary of an ascending channel pattern. If it breaks below this channel, it could indicate a potential shift away from the current bullish sentiment. However, the 14-day Relative Strength Index (RSI) remains above the 50 level, which suggests that bullish momentum is still intact.

In terms of resistance, the USD/INR pair may encounter a barrier at its all-time high of 84.14, recorded on August 5. A breakthrough above this level could push the pair toward the upper boundary of the ascending channel, estimated at around 84.35.

On the downside, if the pair breaks below the immediate support at the psychological level of 84.00, it may target the nine-day Exponential Moving Average (EMA) at approximately 83.97.

Source: FXSTREET

Consumer prices rose by 0.6% in the September quarter. That saw annual inflation fall to 2.2%, the first time it’s been in the RBNZ’s target band since 2021.

Inflation has been pulled down by a sharp fall in imported prices. Domestic inflation has been easing, but more gradually.

While there were some large quarter-toquarter swings (in part related to policy changes), the broader trend in inflation is down. Inflation is set to track close to 2% over the coming year.

Inflation is back inside the RBNZ’s target band for the first time since 2021.

Consumer prices rose 0.6% in the September quarter. That saw the annual inflation rate fall to 2.2%, down from 3.3% in the year to June.

The result was a little below our forecast and was also lower than the RBNZ’s last published forecast.

What underpinned inflation in the September quarter?

Underpinning September’s rise in consumer prices was another big increase in local council rates (+12.2%) and a large increase in food prices (+1.3%, including a seasonal rise in vegetable prices). There was also an increase in healthcare costs related to the reintroduction of prescription fees, with the price of pharmaceutical products rising 17%.

On the housing front, rents were up 0.9% in the September quarter, leaving them up 4.5% over the past year. Housing construction costs were up only 0.1%, with competitive pressures one factor contributing to the low result.

Balanced against those increases, the September quarter saw a 6.5% fall in petrol prices. There has also been softness in the prices of a range of imported durable consumer goods. Notably, new and used motor vehicle prices were down 0.6% and 2.8% respectively. There has also been softness in apparel prices.

Inflation in the September quarter was also pulled down by the introduction of the FamilyBoost early childhood education rebate scheme which began on 1 July 2024.

This policy allows eligible families to claim up to 25% of their weekly childcare fees (up to a maximum of $975 every three months).

Early childhood education costs account for 0.6% of the CPI, and the 22.8% reduction in those costs shaved 0.3ppts off inflation in the September quarter.

If not for that policy change, the quarterly inflation rate would have been 0.9%.

This policy change will dampen the annual inflation figures over the next few quarters, before dropping out of the calculations in September next year.

Annual and core inflation: trending back to target

Of more note than the quarter-to-quarter swings in prices is the continued downtrend in annual inflation, which has been steadily falling for around two years now.

The downtrend in headline inflation is mainly due to the low level of tradables prices (mainly imported retail goods).

Tradable prices fell by 0.2% this quarter, leaving them down 1.6% over the past year. The drop in tradables inflation has been stark – this time last year annual tradables inflation was running at +4.7%.

The fall in tradables prices has in part been due to falls in global prices as international supply conditions have improved over the past couple of years.

The downward pressure on prices has been somewhat amplified by the pressures on household budgets and the related weakness in discretionary spending. That’s resulted in softness in the prices of a range of consumer goods.

Domestic (non-tradable) price pressures have also been easing, but more gradually.

Non-tradable prices rose 1.3% in the September quarter, with the annual rate slowing to 4.9%. While that’s down from 5.4% last quarter, it’s still well above long-run averages.

Notably, non-tradables inflation has been pulled down by the change to early childcare costs (If not for that change, annual non-tradables inflation would have been 5.2%). However, the impact of that policy change is balanced against the reintroduction of prescription fees, which had a similar sized impact.

Under the surface, we are seeing some notable differences in domestic costs. Inflation in service sectors is easing back, consistent with the downturn in economic growth and softening in the labour market. But at the same time, we’re still seeing continued large increases in some non-discretionary expenses, like local council rates. That mix of conditions is likely to continue for some time, meaning that overall non-tradable inflation will remain at firm levels for a while yet.

Even with the ‘stickiness’ in domestic prices, overall inflation is trending down. That was reflected in the various measures of core inflation (which smooth through volatile quarter-to-quarter price movements, and instead track the underlying trend in prices). Most measures of core inflation have been dropping back and are now close to 3%, or in some cases a little below.

Inflation excluding food, fuel and energy costs eased from 3.4% to 3.1% previously.

30% trimmed mean inflation fell from 3.8% to 2.7%

Weighted median inflation fell from 3.5% to 2.8%

Implications

Inflation is at long last back in the RBNZ’s target band, and it looks set to track close to 2% over the year ahead. Consistent with that more-contained inflation outlook, we expect that the RBNZ will deliver another jumbo-sized 50bp cut in November, with further but more gradual cuts next year.

But although the RBNZ will now be feeling more comfortable about how inflation is tracking, the underlying details of today’s inflation report highlight some key areas to watch that could be important for the stance of monetary policy.

First, domestic inflation is still elevated, and not just because of items like council rates. That ‘stickiness’ in domestic prices will be important for how far and fast inflation eases, especially with interest rates now moving down.

At the same time, we are seeing weakness in the prices of imported consumer goods and household spending is still weak. With tradable prices heavily influenced by offshore conditions, the RBNZ often tends to de-emphasise surprises on this front in their policy deliberations. However, continued softness on this front would raise the risk of inflation falling below 2% next year.

A stronger dollar is one of the few obstacles threatening to hamper the stock market boom which has lifted US stocks to a series of records, according to Morgan Stanley’s Mike Wilson.   

The S&P 500 index recorded its 46th all-time closing high of 2024 on Monday as investors gear up for the latest round of corporate earnings. The benchmark ticked up again at the US market open.

“One of the things that could slow down the rally again would be a strengthening dollar,” the bank’s chief US equity strategist said on Tuesday in an interview with Bloomberg Radio.

Bloomberg’s dollar index, a gauge of the currency’s relative strength versus its peers, has gained about 2% since the beginning of October as investors pare back bets on the pace at which the Federal Reserve (Fed) will cut interest rates going forward. 

“That is probably the one thing we are watching now that could kind of throw a wrench into these new records every day,” he added. 

Wilson said the rally was robust, broadening through different sectors of the stock market and driven by central banks easing their monetary policy. “That will continue until we get a real shock in the economic front or you get a restriction on liquidity front,” he said. 

Meanwhile, Bank of America Corp strategists led by Michael Hartnett are seeing a “sell signal” for global equities from a survey conducted from Oct 4 through Oct 10. Fund manager allocations to stocks surged, while bond exposure sank and cash in global portfolios fell to 3.9% from 4.2%, the survey showed. 

That’s “the biggest jump in investor optimism since June 2020 on Fed cuts, China stimulus, soft landing”, the strategists wrote in a note on Tuesday.

Source: The edge markets

Shein has added more banks to help arrange its potential initial public offering that could value the online fashion retailer at £50 billion (S$85.6 billion), potentially one of the biggest listings in London in recent years, people familiar with the matter said.

Barclays and UBS Group have been picked as bookrunners for Shein’s IPO, said the people, who asked not to be identified as the information is private. A listing could take place as soon as early 2025, the people said. Deliberations are ongoing and details of the IPO could still change, the people said.

The new bank mandates come as Shein is meeting prospective investors in New York this week following similar outreach in London. The company has been working with Goldman Sachs Group, JPMorgan Chase & Co. and Morgan Stanley on the listing preparations, Bloomberg News has reported.

Representatives for Barclays, UBS and Shein declined to comment.

Shein rerouted its application to London and confidentially filed papers with the UK authorities earlier 2024 after its initial goal of listing in the US turned sour. The US Securities and Exchange Commission declined Shein’s request to submit a preliminary prospectus confidentially. Its listing still requires regulatory approvals in China and the UK.

Founded in China but now based in Singapore, Shein has become one of the world’s most valuable start-ups thanks to its model of high-volume, ultra-cheap fashion. Its phenomenal success has drawn competition from the likes of ByteDance’s TikTok and PDD Holdings’ Temu.

In the UK, Shein saw its revenue rising 38 per cent in 2023 from a year earlier, according to a filing last week at UK registry Companies House. Significant milestones in the year included opening its Manchester office and pop-up shops across the UK, including a bus tour, the company said.

All companies looking to sell shares in London will face scrutiny over workers’ rights, UK Prime Minister Keir Starmer told Bloomberg Television on Monday, in response to questions about whether his new Labour government would welcome a listing by Shein. 

Source: Straitstimes

US aircraft manufacturer Boeing unveiled measures meant to replenish its cash flow on Oct 15, including an intention to raise up to US$25 billion (S$32.7 billion), as it navigates recurrent production problems and a major US strike.

In a regulatory filing, the aviation giant indicated plans to raise the funds by selling stock and debt.

It also earlier announced that it was in an agreement to obtain US$10 billion in credit from multiple banks.

The moves come amid a machinist strike in the Seattle region which effectively shut down assembly plants for the 737 MAX and 777.

About 33,000 Boeing workers in the Pacific Northwest have been on strike for nearly a month in a fight focused on higher wages and improved retirement benefits.

Workers complain of more than a decade of near-flat wages during a period when inflation has risen.

Boeing staff with the International Association of Machinists and Aerospace Workers (IAM), walked off the job on Sept 13 after overwhelmingly rejecting a contract offer.

The direct financial impact of the first month of the strike cost Boeing more than US$3 billion, according to Anderson Economic Group.

The IAM said in a statement last week that it is “ready and willing to resume negotiations at any time.”

But it added Oct 14: “While it is important to return to the table, the Union remains firm on securing an agreement that truly reflects the respect our members have earned and deserve.”

Last week, Boeing said it planned to cut 10 per cent of its workforce as it projected a large third-quarter loss in the wake of the labour action.

The cuts of 17,000 positions globally will include executives, managers and employees, according to chief executive Kelly Ortberg, who added that the company must “reset our workforce levels to align with our financial reality.”

Details of the cuts were expected to come this week.

The work stoppage has only added to the company’s litany of problems.

As a result of the strike, Boeing has said it is pushing back first delivery of the 777X to 2026 from 2025. The much-delayed jet was originally supposed to enter service in January 2020.

Boeing sank into further turmoil in January when a panel blew out mid-flight on an Alaska Airlines plane, necessitating an emergency landing on a 737 MAX, the aircraft involved in two fatal crashes in 2018 and 2019.

That led to the Federal Aviation Administration tightening oversight of Boeing’s production processes, capping the company’s output. Production on the MAX is now halted due to the IAM strike. 

Source: Straitstimes