Weekly Macro Matters
Macro Matters – Weekly review, w/c October 23
The Israeli-Hamas conflict heightened global market uncertainties last week, alongside surging US Treasury yields that briefly breached 5%. While US retail sales exceeded expectations and earnings reports were solid, Federal Reserve Chair Jerome Powell reiterated that inflation remains too high.
Macro Matters – Weekly Review, w/c October 23
Macroeconomic / Geopolitical Developments
• Middle East War Sustains Market Hesitancy
• US Yields Hit Multi-Year Highs
• US Earnings Coming in Solid
• US Retail Sales Beat Expectations
• Powell Says “Inflation Is Still Too High”
Middle East War Sustains Market Hesitancy
The Israeli-Hamas conflict has intensified market caution globally, with investors monitoring potential escalations that could impact oil prices and geopolitical stability. Diplomatic efforts are ongoing, with US President Joe Biden and UK Prime Minister Rishi Sunak visiting Israel to support peaceful resolutions and humanitarian aid.
US Yields Hit Multi-Year Highs
Last week, the 10-year US Treasury yield briefly surpassed 5%, its highest level since 2007. This surge reflects market expectations of prolonged high interest rates, although yields retreated midweek. A financial shock or abrupt economic slowdown may be required to trigger a bond market rally.
US Earnings Coming in Solid
Earnings reports were a mixed bag, with Goldman Sachs and Bank of America beating expectations. Tesla missed estimates due to falling operating margins, while Netflix exceeded forecasts, gaining 8.76 million new subscribers in Q3.
US Retail Sales Beat Expectations
Retail sales rose 0.7% in September, driven by strong auto and dining spending, suggesting robust Q3 economic growth. However, this could increase the likelihood of a Fed rate hike as consumer demand remains resilient despite higher borrowing costs.
Powell Says “Inflation Is Still Too High”
Fed Chair Jerome Powell noted that inflation, while easing, remains elevated. He emphasised cautious policymaking, reinforcing expectations that interest rates will stay unchanged at the next meeting. Key inflation and economic data this week will provide further clarity.
What’s Ahead
Central Bank Watch:
• Bank of Canada (BoC) and European Central Bank (ECB) interest rate decisions on Wednesday and Thursday.
Macroeconomic Data Watch:
• Global Flash PMI (Tuesday), US Durable Goods and GDP (Thursday), and US PCE (Friday).
Earnings Watch:
• Major earnings include Microsoft and Alphabet (Tuesday), Meta Platforms (Wednesday), and Amazon (Thursday).
Major Macro Data:
• 10/23/2023: EU Consumer Confidence
• 10/24/2023: Global Flash PMI, UK Employment Report
• 10/25/2023: Australian CPI, German IFO Survey, BoC Interest Rate Decision
• 10/26/2023: ECB Interest Rate Decision, US Durable Goods, US GDP, US PCE (QoQ)
• 10/27/2023: US PCE (MoM, YoY), Michigan Consumer Sentiment Index
US Earnings Releases:
• 10/24/2023: Microsoft, Alphabet, Texas Instruments
• 10/25/2023: Meta Platforms, IBM, Boeing
• 10/26/2023: Amazon, Intel, Caterpillar
• 10/27/2023: Exxon Mobil, Chevron
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