OPEC+ countries are cutting production. Credit Suisse bank moves toward default

After a smallerthanexpected interest rate hike by the RBA this week and the UN asking central banks to slow interest rate hikes, the fundamental narrative shifted toward a potential “turnaround” by the Fed toward a slower interest rate hike. This has helped support stock markets. On the other hand, the US Consumer Confidence and Service Sector Activity Index data were better than expected, suggesting that the US economy is holding up relatively well so far. Thus, the US Fed may not shy away from its hawkish bias, which will once again put pressure on stocks.

As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 0.14%, and the S&P 500 Index (US500) lost 0.20%. NASDAQ technology index (US100) fell by 0.30%.

Mary Daley, President of the San Francisco Federal Reserve, said that the Fed’s goal is to keep tightening monetary policy until interest rates are at a restrictive level. The policymaker added that the US Federal Reserve does not expect interest rates to fall in 2023.

Credit Suisse’s credit risk continues to rise sharply. Yesterday, SocGen analysts wrote that Credit Suisse must actively deleverage its investment banking operations or risk default. But analysts at HSBC said Credit Suisse has no immediate concerns about liquidity and funding.

Equity markets in Europe were mostly down yesterday. German DAX (DE30) was 1.21% lower, French CAC 40 (FR40) fell by 0.90%, Spanish IBEX 35 (ES35) decreased by 1.52%, British FTSE 100 (UK100) was 0.48% lower.

With almost 90% of the storage capacity in the EU, Europe will survive the coming winter with only a few scratches, barring any political or technical surprises, but the real difficulties will start in February or March when the storage capacity needs to be filled again.

The German economy minister blamed the United States and other “friendly” gassupplying countries for the astronomical prices of their supplies. According to the minister, some gas suppliers are profiting from the consequences of the war in Ukraine, which has led to a sharp rise in global energy prices. Russia’s invasion of Ukraine continues to undermine energy markets, global supply chains remain trapped in China’s COVID19 strategy, and advanced economies are moving ever closer to stagflation.

Leaders from more than 40 countries, meeting Thursday in the Czech capital, are set to create a “European Political Community,” which aims to increase security and prosperity across the continent. But critics say the new forum is an attempt to stall the expansion of the European Union.

OPEC+ countries have agreed to cut oil production by 2 million BPD. OPEC+ oil production cuts will take effect in November. Oil producers do not want to allow oil prices to fall and will reduce production to maintain “profit.” In a statement issued after the OPEC+ decision, the White House said it was disappointed by the shortsighted decision to cut production quotas at a time when the world economy is facing the continued negative impact of Putin’s invasion of Ukraine. Biden also directed the Energy Secretary to explore additional actions to increase domestic fuel production. Goldman raised its oil forecast immediately by $10 to $110 by the end of the year.

OPEC+ will no longer meet monthly. Meetings will now be held every two months.

Bond yields have corrected downward in recent days amid speculation that the Fed may move to a less aggressive policy in the near future amid growing tensions in financial markets and fears of a global recession. This situation supported gold and silver prices, causing a sharp rally in recent days. But the outlook for gold and silver remains bearish in the medium and long term as the tightening cycle goes on.

Asian markets traded higher yesterday. Japan’s Nikkei 225 (JP225) increased by 0.48%, Hong Kong’s Hang Sengv(HK50) jumped by 5.90%, and Australia’s S&P/ASX 200 (AU200) ended the day up by 1.74%.

S&P 500 (F) (US500) 3,783.28 −7.65 (−0.20%)

Dow Jones (US30) 30,273.87 −42.45 (−0.14%)

DAX (DE40) 12,517.18 −153.30 (−1.21%)

FTSE 100 (UK100) 7,052.62 −33.84 (−0.48%)

USD Index 111.15 +1.09 (+0.99%)

• Japan BOJ Gov Kuroda Speaks at 03:30 (Tentative);
• UK Construction PMI (m/m) at 11:30 (GMT+3);
• Eurozone ECB Monetary Policy Meeting Accounts at 14:30 (GMT+3);
• US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• Canada Ivey PMI (m/m) at 17:00 (GMT+3);
• US Natural Gas Storage (w/w) at 17:30 (GMT+3).

by JustMarkets, 2022.10.06