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Week in Review: 3-7 October 2022

Summary:

The hot topics of this week included the reduction of the oil production target by OPEC+, the application of more sanctions on Russia by the EU, and the revelation of the U.S. unemployment rate and the non-farm payrolls for September. Although the unemployment rate remains at low levels, the payrolls showed signs of deceleration. This was enough to scare the markets and make stocks tumble on Friday. In the immediate future we may get a bounce and a few days of indecision in the markets.

Next week there will be more FED speeches and the release (on Thursday) of the updated US inflation rate for the month of September. Will this help break resistance on the main stocks and send us a step lower into this bear market? Maybe... Otherwise we'll have to wait for the slowing economy news during the upcoming earnings season.


US Job Market


Sources:

Trading Economics (Payrolls)

Trading Economics (Unemployment Rate)


"The US economy added 263K jobs in September of 2022, the least since April of 2021 but above market forecasts of 250K. Notable job gains occurred in leisure and hospitality (83K), health care (60K), professional and business services (46K), and manufacturing (22K). The reading marks a drop from an average of 439K in the first eight months of the year, as higher interest rates and prices started to weigh on the economy. Still, the number continues to point to a tight labor market with employment about 500K higher than its pre-pandemic level."

"The US unemployment rate fell to 3.5 percent in September 2022, matching July's 29-month low and remaining below market expectations of 3.7 percent, in another sign overall labor market conditions in the world's largest economy remain tight. The number of unemployed persons declined by 261 thousand to 5.75 million in September, while the number of employed increased by 204 thousand to 158.9 million. The labor force participation rate edged down to 62.3 percent from 62.4 percent."



U.S. National Debt at Record High: $31 Trillion

 

Source: The New York Times

"America’s gross national debt exceeded $31 trillion for the first time on Tuesday, a grim financial milestone that arrived just as the nation’s long-term fiscal picture has darkened amid rising interest rates.

The breach of the threshold, which was revealed in a Treasury Department report, comes at an inopportune moment, as historically low interest rates are being replaced with higher borrowing costs as the Federal Reserve tries to combat rapid inflation. While record levels of government borrowing to fight the pandemic and finance tax cuts were once seen by some policymakers as affordable, those higher rates are making America’s debts more costly over time."



New Package of Sanctions (8th) Against Russia


Source: EU

"The Commission welcomes the Council's adoption of an eighth package of hard-hitting sanctions against Russia for its aggression against Ukraine. This package – which has been closely coordinated with our international partners – responds to Russia's continued escalation and illegal war against Ukraine, including by illegally annexing Ukrainian territory based on sham “referenda”, mobilising additional troops, and issuing open nuclear threats.

This package introduces new EU import bans worth €7 billion to curb Russia's revenues, as well as export restrictions, which will further deprive the Kremlin's military and industrial complex of key components and technologies and Russia's economy of European services and expertise. "

Comment: We know this will backfire...again...



The Biden's Businesses...


Video: Jesse Watters: This is about to get ugly

Channel: Fox News



The Arabs vs the Americans: OPEC+ Oil Production Cuts


Video: Gas prices rise as OPEC announces oil production cut

Channel: CBS Evening News



Video: Gravitas: Saudi Arabia hikes oil prices for US buyers | Latest English News | WION

Channel: WION





OIL
 
 
WTI crude futures soared more than 4.5% to nearly 5-week highs above $92.5 per barrel on Friday, and were set to gain more than 15% this week, the most since early March as OPEC+ agreed to cut production by 2 million barrels per day or about 2% of global supply from November, in a move that threatens to squeeze supply further ahead of the winter season. That would be the biggest output cut since the start of the pandemic, though Saudi Arabia’s oil minister said the actual cut will likely be around 1 to 1.1 million barrels as some members are already pumping below targets. US President Joe Biden showed dismay over OPEC+’s decision on Thursday and said the US was looking for ways to keep prices from rising. Adding to supply concerns, Russia warned again this week that it won’t sell oil to countries that support the US-led plan to impose a price cap on Russian oil.





Natural Gas
 

US natural gas futures fell to below $6.8/MMBtu back towards its 3-month low of $6.3/MMBtu as the US economy and labor market remain robust and continued Fed hawkishness is expected. The EIA reported on the largest-every increases in domestic inventories last week, with US utilities adding 129 billion cubic feet (bcf) of gas to storage, above market expectations of a 113 bcf build due to mild weather and an increase in wind power. Also, keeping a lid on prices were record levels of domestic output and a recent cut in gas demand from hurricane-induced power outages. Average gas output in the US Lower 48 states rose to 100.1 bcfd so far in October from a record 99.4 bcfd in September, according to data provider Refinitiv. Still, Average US gas demand, including exports, is expected to increase to 91.5 bcfd next week from 90.2 bcfd this week, above Refinitiv's previous outlook, amid cooler weather.
 


 

 
US Stock Markets
 

US stocks traded deeply in the red on Friday, with the Dow Jones falling over 600 points, while the S&P 500 fell more than 3% and the Nasdaq dropped almost 3.8% after fresh labor market figures dashed any hopes of a slower pace of tightening by the Fed. The jobs report continued to point to a tight labor market, with the US economy adding 263K jobs last month, above forecasts of 250K, while the unemployment rate unexpectedly fell to 3.5%. On the corporate front, shares of Advanced Micro Devices slumped nearly 14% after the company reported weaker-than-expected preliminary revenue for Q3. On the week, however, the three major averages are up nearly 2% from lows reached on September 30.





 
Bitcoin
 

Bitcoin US Dollar traded at 19394 this Sunday October 9th, decreasing 157 or 0.80 percent since the previous trading session. Looking back, over the last four weeks, Bitcoin lost 9.51 percent. Over the last 12 months, its price fell by 64.53 percent. Looking ahead, we forecast Bitcoin US Dollar to be priced at 17425 by the end of this quarter and at 12903 in one year, according to Trading Economics global macro models projections and analysts expectations.



 
Gold
 

Gold prices fell to $1,700 an ounce on Friday, extending losses for a third session as investors digested better than expected labor market data. The nonfarm payrolls report showed that the US economy added 263,000 jobs in September, above expectations of 250,000 and adding room for the Federal Reserve to maintain the aggressive hiking momentum that it pledged. The metal has been whipsawed throughout the week by shifting views on US monetary policy, with weak US PMI data initially driving bullion higher on expectations that the Fed could ease its tightening pace, before facing pressure toward the end of the week as hawkish remarks from US policymakers retracted pivot hopes. Despite the late-week retreat, gold prices are set to end the week 3% higher, marking the biggest weekly gain since March.





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