JASPER’S MARKET SQUAWK 25-10-2022

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JASPER'S MARKET SQUAWK 25-10-2022

Dollar mixed after US PMI shows contraction

The US dollar erased most of its intraday gains yesterday after US PMI figures showed that Manufacturing also fell into contraction, well below expectations at 52.0. The flash data offered key index players the opportunity to come back stronger, with the S&P, DJIA and Nasdaq closing 1.19%, 1.34% and 0.86% higher.

Major currencies did not follow suit as all eyes turn to the ECB and details around the mini-budget after Sunak's win as UK's new Prime Minister.

DJIA Chart

Key factors for today:

• US Manufacturing falls into contraction, following EU/UK steps


• Chinese data policy on tech sector sends US-listed stocks down


• Rishi Sunak wins the leadership contest, as all opponents withdraw


• e- war back into spotlight while EU gas prices deteriorate

US Manufacturing enters contraction, backing EU/UK

October's Preliminary Manufacturing PMI in the US is technically in contraction at 49.9, the lowest seen since the middle of 2020. Flash manufacturing PMIs in the EU and the UK were below expectations, at 45.8 and 46.6, falling further into contraction. The somewhat unexpected results renewed fears of a global recession. Euro and pound printed a 'doji' candlestick against the dollar, near 0.9870 and 1.1280 - respectively, at US PMIs had the greenback ending flat as well, offering no respite.

Xi's new data policy brings another round of losses

US-listed shares of Chinese firms fell across the board, dropping around 15% on average in the wake of recent political changes following Xi's 3rd reappointment. Alibaba and Tencent Music plunged 12% and 5%, respectively, with Pinduoduo crashing 34%. Overnight, Chinese stocks had a mixed performance, but the implementation of new stricter data protection policies in the tech sector opened the door to further declines.

UK has a new PM: Rishi Sunak

Former Chancellor Rishi Sunak won the Tory leadership contest to succeed Liz Truss by default, as the only two candidates running for the leadership contest withdrew before the vote. Markets seemed relieved initially as cable rose to 1.13, but the session ended mixed, suggesting the focus shifts on the budget.

Reportedly Jeremy Hunt would continue as Chancellor, but a decision hasn’t been made. Incoming PM Sunak said he would decide whether the budget would be announced on Oct 31. He is expected to get a mandate to form a government from King Charles today.

e in focus ahead of mid-terms

Over the weekend,  accused e of preparing to use a “dirty bomb” – a conventional bomb with nuclear material. Defense Minister Shoigu contacted several Western leaders on the subject. The issue was dismissed as a potential ‘false flag’. Natural gas prices have come off under 100 euros per MWh for the first time since June as LNG tankers float due to storage shortages.

Meanwhile, 30 Democrat members of Congress sent a letter to Joe Biden asking for direct talks with  to end the conflict, as support for the war was expected to wane following the midterms in which Republicans are expected to win at least one of the chambers. In Europe, Germany will host a conference on rebuilding a post-war e.

Movers and shakers

• Toyota Motor rose 1.7%, reportedly rebooting its EV strategy valued at $38B to better compete with rivals such as Tesla. The firm has already halted some projects and expects to provide an update on the review early next year


• HCA Holdings ticked 7.0% higher after reporting its earnings on Friday. A flurry of analysts upgraded their outlook and gave the stock a second wind on Monday


• Starbucks fell 5.5% on concerns over the situation in China


• Las Vegas Sands declined 10.3% after it was said that Macau had no date to resume tour groups from China and concerns that mainland lockdowns would continue


• Regions Financial climbed 5.3% higher in a trend continuation after its earnings report on Friday as analysts upgraded their outlook through Monday

On the docket

• US to report CB Consumer Confidence, expecting a slowdown from 108.0 to 106.50


• API expected to reveal weekly crude stocks change ahead of EIA

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