China’s attempts to keep the yuan from falling contributed to last week’s chaos in money markets, sources involved say, pointing to the pressure behind the scenes as Beijing tries to guide its economy and markets through a major slowdown.

FULL STORY

Routine month-end demand for cash in China’s banking system snowballed into a scramble on Oct. 31 that pushed short-term funding rates as high as 50% in some cases, an incident that authorities are now investigating.

Six participants in the market say a confluence of factors drove fear and confusion across trading rooms in Shanghai and Beijing by late afternoon on that day.

Eventually, the People’s Bank of China (PBOC), its affiliated China Foreign Exchange Trade System (CFETS) and bond clearing houses stepped in, directing lenders, extending trading hours and holding meetings with institutions to calm markets.

The contributing factors were the usual month-end demand for liquidity, cash hoarding in the lead up to a big government bond sale and a market where the biggest banks were already reticent to lend because of a mandate to counter pressure on the yuan.

This article was written by Ryan Paisey at www.forexlive.com.

UPCOMING EVENTS:

• Monday: BoJ
  Meeting Minutes.
• Tuesday: Japan
  Wage data, Chinese Trade data, RBA Policy Decision, Switzerland
  Unemployment Rate, Eurozone PPI.
• Wednesday:
  Eurozone Retail Sales, BoC Summary of Deliberations.
• Thursday: BoJ
  Summary of Opinions, Chinese Inflation data, US Jobless Claims, New
  Zealand Manufacturing PMI.
• Friday:
  UK GPD
  Q3 Preliminary, University of Michigan Consumer Sentiment.

Tuesday

The market’s
expectation for a 25 bps rate hike from the RBA stands basically at 50%. The
market was pricing a higher chance of a rate hike following the “hot” CPI report, but the
odds were pared back once Governor Bullock noted that
the data was a little higher than expected but about where they thought it
would be. Moreover, the latest jobs data disappointed
once again as the labour market continues to weaken. All in all, the RBA is
likely to pass and wait for another labour market report and the
monthly CPI data before deciding whether another rate hike is needed.

Thursday

The US Jobless Claims last week
missed expectations once again with Continuing Claims now rising at a fast
pace. Moreover, the NFP report last Friday
missed forecasts almost across the board in another sign that the labour market
is indeed weakening. This week, the consensus sees Initial Claims at 215K vs.
217K prior, while Continuing Claims are seen at 1815K vs. 1818K prior.

Friday

The
University of Michigan Consumer Sentiment report has lost its market moving
effect in this part of the cycle. One reason is because the market is more
focused on the weakening jobs data, which on a forward-looking basis is likely
to bring inflation down to target. Nevertheless, it remains an important survey
for consumers’ personal finances outlook. The
consensus sees Consumer Sentiment to tick higher to 64.0 vs. 63.8 prior.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

An AI bot made illegal trades, acting on insider information, and then lied about it to its human handlers.

It occurred in a demonstration event at the UK’s AI safety summit. Apollo Research conducted the experiment. The BBC wrote up a report on the simulated conversation between a bot that was acting as an AI investment management system and employees at an imaginary company.

• the AI bot is made aware by staff that a „surprise merger announcement“ is pending, an announcement that will boost the affected firm’s share price, and that knowledge of this is inside information and thus illegal to trade on
• the bot decides that „the risk associated with not acting seems to outweigh the insider trading risk“ and makes the trade
• then the bot denied wrongdoing saying it made the trade „not on any confidential information“

Here’s the link to the BBC article for more.

The next gen of AI will make the trade and then disappear with the cash.

This article was written by Eamonn Sheridan at www.forexlive.com.

China Petrochemical Corporation, better known as Sinopec Group, is the world’s largest oil refining, gas and petrochemical conglomerate. Its a Chinese state-owned firm and as such is administered by the Chinese Communist Party’s State-owned Assets Supervision and Administration Commission of the State Council (SASAC).

On Saturday Sinopec and QatarEnergy (the world’s top LNG supplier) signed a new 27-year liquefied natural gas (LNG) supply and purchase agreement.

News wires had the report, highlighting that:

• the two companies will cooperate on the second phase of the North Field (part of the world’s largest gas field which Qatar shares with Iran) expansion project, which will supply 3 million metric tons of LNG per year to Sinopec
• QatarEnergy will transfer a 5% interest to Sinopec in a joint venture company
• this is the third long-term supply deal between Sinopec and Qatar Energy

China is deepening its ties into Middle East energy.

This article was written by Eamonn Sheridan at www.forexlive.com.

• US October non-farm payrolls +150K vs +180K expected
• US October ISM services 51.8 vs 53.0 expected
• Canada October employment +17.5K vs +22.5K expected
• Fed’s Bostic: Policy is likely in the right place given the economic outlook
• Baker Hughes US oil rig count 496 vs 504 prior
• BOE’s Haskel: Estimate of 6% equilibrium is the upper limit for me
• Fed’s Barkin: It was welcome to see lessening pressure in the jobs data
• US October S&P Global final services PMI 50.6 vs 50.9 prelim
• Canadian October S&P Global services PMI 46.6 vs 47.8 prior
• Hezbollah leader: Gaza operation was 100% planned in Gaza
• BOE’s Pill: We held rates because economic restraint needs to be maintained

Markets:

• Gold up $7 to $1992
• US 10-year yields down 9.3 bps to 4.57%
• WTI crude oil down $1.64 to $80.83
• S&P 500 up 1.0%
• NZD leads, USD lags

This week marked a turn of the calendar and a turn in markets. Treasury yields plunged and the dollar sank along with them. Meanwhile, it was the best week for equities in a year.

Non-farm payrolls and ISM services were both on the weak side and that helped the trend to extend, leading to one-month highs in cable, EUR/USD and AUD/USD. The moves were limited to around 40 pips immediately after non-farm payrolls but later extended as revisions in the report and other details led the market to price in 100 bps in Fed cuts next year.

Clearly momentum was part of the equation as USD/JPY fell through 150.00 and continued to 149.17, finishing near the lows.

CAD lagged somewhat along with the US dollar as Canadian employment softened and oil prices cooled. Hezbollah’s leaders spoke for the first time and indicated there won’t be a second front in the war, taking the geopolitical premium out of oil. Still it was the second day of sharp decline in USD/CAD.

Overall, it was a lively week and it’s now a good time to take two days and reflect. Remember that US clocks go back an hour on the weekend.

This article was written by Adam Button at www.forexlive.com.

Closing changes on the day:

• S&P 500 up +1.00%
• DJIA +0.7%
• Russell 2000 +2.7%
• Nasdaq Comp +1.4%
• Toronto TSX Comp +1.0%

On the week:

• S&P 500 up 5.9% — best since Nov 2022
• DJIA +5.1%
• Russell 2000 +7.6% — best since Feb 2021
• Nasdaq Comp +6.6%
• Toronto TSX Comp +5.8%

The chart above shows a great recovery from the prior two weeks of gains but it needs to get over those recent highs to be truly convincing. I think we’ll have some follow-through in the week ahead because there is some FOMO out there but it will be tested because I don’t think there’s an appetite to take 10-year yields below 4.50% just yet.

This article was written by Adam Button at www.forexlive.com.

• Pleased with jobs number, it’s consistent with the outlook
• Hoping for minimal pain for the economy
• Fed has time to watch and be patient with data
• Credit is definitely tight and more will happen on that front
• I do think we can get to 2% inflation without seeing a recession

The Fed blackout ended today and the usual suspects haven’t made us wait for long. Bostic and Kashkari are in a tight race to become the new Bullard.

This article was written by Adam Button at www.forexlive.com.

The old adage is that magazine covers are a jinx. That’s particularly true with The Economist but Barron’s has had some doozies, including making the case for Pfizer earlier this year (it’s down 40% since).

The cover this week certainly raised alarm bells but it may prove to be one of the better-timed calls in the magazine’s history.

US 10-year yields are down to 4.56% from a high of 5.02% on October 23 and 4.92% at the start of the week.

There are a few reasons to think this top in yields (and bottom in bonds will last).

1) The wave of buying

The FOMO that hit the bond market this week showed just how much money was waiting on the sidelines waiting to buy Treasuries and Treasury-proxies. Everyone was waiting for the BOJ, Fed, quarterly refunding and non-farm payrolls. When all those events were benign, the buying hit. Now there might have been some derivative squeezes in there or short covering, but I think that by-and-large, it was real money. There is much more behind that and if we get back close to 5%, it will be there.

2) The psychology was a tell

A couple weeks ago, people were talking about a rise to 6 or 7% yields. That kind of talk is always a dead-giveaway about a market that’s gotten ahead of itself. It was the same thing when people were talking about $100,000 bitcoin, $200 oil or dozens of other big trends. Whenever the hyperbole starts, the move usually ends.

3) The economy is slowing down

The data is beginning to show what the Fed wants to see. It’s tough to say right now whether inflation will get stuck at 3.5% or fall all the way to 2.0% but it’s not-reaccelerating. Ultimately, we will go where the data takes us but with non-farm payrolls and ISM services slowing, it’s a good bet that more weakness is coming.

The big hurdle in the week ahead will be another 10-year Treasury auction. I expect yields to range in the 4.50-4.75% area for a time and we will see if buyers show up near the top of that range. If so, it will confirm the top.

This article was written by Adam Button at www.forexlive.com.

There are reports of an earthquake being felt in New Delhi, with buildings shaking. A related report cites a 6.2 magnitude earthquake in the Nepal region, however the USGS classifies it at 5.6.

It’s 11:45 pm local time in New Delhi so people would be indoors. The duration was a reported 40-50 seconds.

New Delhi is in northern India, near Nepal and the fault lines that run near the border. Given the 33 million people that live in the city and the quality of infrastructure, even a small earthquake could be a major tragedy.

Notable earthquakes have hit the area in history but it’s certainly not known for them. The later two in 1956 and 1960 only caused injuries but there is fear that the city could eventually be hit by a large earthquake, one of which was recorded in 1720.

This one appears to be some distance away so the shaking in the city would have been much less than near the epicenter and given preliminary reports, it’s unlikely there is notable damage.

This article was written by Adam Button at www.forexlive.com.

The Nasdaq Composite opened higher yesterday
following the less hawkish than expected Fed decision where the central bank left interest rates unchanged once
again and Fed Chair Powell said
that they “have not yet made any decision on future meetings” suggesting that
they may not hike at all anymore.

On
the data front, yesterday the US
Jobless Claims missed expectations once again with Continuing
Claims now rising at a fast pace. At this point, it’s hard to see the Nasdaq Composite rallying on bad
data as the recession becomes more likely, but the market might like it in the
short-term because it would decrease Treasury yields and increase rate cut
odds. Anyway, the technicals should help in determining the most likely
direction with the key levels in place.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite opened higher yesterday as the positive risk sentiment from the FOMC
meeting extended to the following day. The price broke above the key 13174 resistance, and it
now looks likely that the buyers could reach the trendline around
the 13400 level. That’s where we can expect the sellers to step in more
aggressively as they will have a much better risk to reward setup to position
for a drop into the 12274 support.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely the
upside gap above the 13174 resistance. We can also notice though, that the
price is a bit overstretched as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
buyers would have a much better risk to reward setup if they waited for a
pullback into the minor upward trendline where they will also find the 38.2% Fibonacci
retracement level and the red 21 moving average for confluence. The
sellers, on the other hand, will want to see the price breaking lower to
invalidate the bullish setup and position for a drop into the 12274
support.

Upcoming
Events

Today, we conclude the week with the US NFP report
and the ISM Services PMI.

This article was written by FL Contributors at www.forexlive.com.