Escalating conflict in the Middle East boosts demand for oil and gold. China’s quarterly GDP grew more than expected

Comments from FRB President Richmond Barkin signaled his support for a pause in Fed rate hikes and lent support to stocks later in the day when he said: “I am still looking to be convinced, both, that demand is settling and that any weakness is feeding through to inflation.” He added that the path of inflation is not yet clear, and there is time to see if the US Fed has done enough or if there is still work to be done.

US retail sales for September rose by 0.7% m/m and 0.6% m/m excluding motor vehicles, beating expectations of 0.3% m/m and 0.2% m/m excluding motor vehicles. Retail sales for August were also revised upward to 0.8% m/m and 0.9% m/m, respectively. The US manufacturing output for September rose by 0.4% m/m, which was stronger than expected.

Moderna (MRNA) stock price declined more than 5%, adding to the 6% decline seen on Monday and topping the list of losers in the S&P 500 and Nasdaq 100 markets after Pfizer cut its full-year outlook due to weaker-than-expected demand for its anti-Covid-19 drug. Goldman Sachs (GS) closed down more than 1% after reporting third-quarter net interest income of $1.55 billion, which was weaker than the consensus forecast of $1.86 billion.

Canadian inflation unexpectedly slowed from 4% to 3.8% y/y in September, while the core CPI also fell from 3.3% to 2.8%, prompting markets and analysts to cut bets on another interest rate hike next week. The probability of a rate hike next week now stands at 16% vs. 43% before the data was released.

ECB Chief Economist Lane said yesterday that monetary policy easing is only possible when ECB officials are reasonably confident of achieving the 2% inflation target, but that’s pretty far from where the ECB is now.

Oil prices rose sharply in Asian trading on Wednesday after a deadly explosion at a Gaza hospital thwarted US diplomatic efforts in the war between Israel and Hamas. The White House said US President Joe Biden would not visit Jordan as part of his trip to Israel after Jordanian Foreign Minister Ayman Safadi said a planned summit between US, Egyptian, and Palestinian leaders would not take place. The trip was seen as an attempt to maintain support for Israel while placating Arab countries by preventing the conflict from escalating further. A spreading conflict between Israel and Hamas could disrupt crude oil supplies to the oil-rich Middle East region, further pushing up oil prices.

The USD/JPY pair is targeting highs above the 150 mark as rising Japanese government bond (JGB) yields outpace Treasury yields amid a geopolitical environment that is somewhat supportive of safe haven assets. The spread between bonds favors the US dollar and could put upward pressure on the exchange rate.

China’s gross domestic product GDP grew by 4.9% in the last quarter, exceeding expectations of 4.4% growth. However, the figure was weaker than the 6.3% growth seen in the previous quarter. Nevertheless, quarter-on-quarter GDP growth accelerated more than expected, suggesting that the government’s range of monetary stimulus measures is working. However, sentiment towards China remained weak amid growing fears of a massive debt default by struggling real estate developer Country Garden Holdings.