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Week in Review: 23-27 October 2023

Global News

 

44 Billion USD Exits Bank of America, Morgan Stanley and BNY Mellon in Three Months As Deposit Flight Refuses to Relent. 

The three US financial titans just witnessed the flight of deposits in excess of $44 billion in a single quarter.

According to Bank of America’s most recent quarterly earnings press release, the lender’s average deposits fell by $26.2 billion in three months. Meanwhile, BNY Mellon and Morgan Stanley depositors pulled out approximately $15 billion and $3 billion, respectively, in the last quarter.

Amid the decrease in deposits, JPMorgan, Wells Fargo and Citigroup are reportedly shelling out billions of dollars to keep customers from moving their funds. The Wall Street Journal reports JPMorgan and Wells Fargo paid approximately $21 billion and $9 billion in interest expense in Q3, respectively.

Source: https://dailyhodl.com/2023/10/22/44354000000-exits-bank-of-america-morgan-stanley-and-bny-mellon-in-three-months-as-deposit-flight-refuses-to-relent/



Israel rejects calls for ceasefire and says UN chief Guterres should resign.

World leaders gathered to debate whether to support a temporary ceasefire to enable the release of Hamas’ remaining 200 hostages and allow more humanitarian aid into Gaza.

Mr Guterres said:

“The Palestinian people have been subjected to 56 years of suffocating occupation,”

“But the grievances of the Palestinian people cannot justify the appalling attacks by Hamas. And those appalling attacks cannot justify the collective punishment of the Palestinian people.'

Israeli ambassador Mr Erdan said the UN chief’s comments showed that he was “completely disconnected from the reality in our region”.

“The UN Secretary General, who shows understanding for the campaign of mass murder of children, women, and the elderly, is not fit to lead the UN,” Mr Erdan said.

Israel has so far rejected calls for a ceasefire, as it continues to insist it is preparing to 'wipe out' Hamas in a ground invasion after a terrorist attack killed 1400 Israelis earlier this month.

Source: https://www.lbc.co.uk/news/un-chief-called-resign-israel-rejects-ceasefire-palestine-gaza-hamas/


 

 

Economics

The HCOB Eurozone Manufacturing PMI fell to 43 in October 2023, the lowest in three months and missing market expectations. New orders received fell sharply, backlogs of orders were depleted and firms reduced employment for a fifth consecutive month and at the sharpest rate since August 2020. Input prices were down, although the rate of decline eased for a third month in a row. Looking ahead, confidence about output levels in the year-ahead deteriorated.

Services PMI fell to 47.8, pointing to the third consecutive month of contracting service sector activity and the biggest slump since February 2021. These declines show a cooling of the post pandemic surge in spending on travel and recreation.

Sources:

https://tradingeconomics.com/euro-area/manufacturing-pmi

https://tradingeconomics.com/euro-area/services-pmi



The European Central Bank kept interest rates unchanged at its October meeting, reflecting a more cautious wait-and-see stance among policymakers, influenced by the gradual easing of price pressures and concerns about an impending recession.

This decision follows a series of ten consecutive rate increases since July 2022, which elevated the main refinancing operations rate to a 22-year high of 4.5% and the deposit facility rate to an all-time record of 4%.

The central bank also stated its determination to ensure that inflation returns to its 2% target over the medium term, saying it will maintain interest rates at these elevated levels for a sufficiently extended period until it achieves that objective.

Source: https://tradingeconomics.com/euro-area/interest-rate



The US economy expanded at an annualized rate of 4.9% in the third quarter of 2023, the most since the last quarter of 2021, and above market forecasts. Consumer spending rose 4%, led by consumption of housing and utilities, health care, financial services, insurance, food services, accommodation and nondurable goods.

Source: https://tradingeconomics.com/united-states/gdp-growth

 

 

The number of Americans filing for unemployment benefits rose by 10000 to 210000 on the week ending October 21st, slightly above market expectations.

Initial jobless claims remained relatively close to the nine-month low from the previous week, sustaining the perception that the US labor market is at historically tight levels.

Source: https://tradingeconomics.com/united-states/jobless-claims

 

 

The personal consumption expenditure price index, in the US, rose 0.4% month-over-month in September 2023, the same as in August and above market forecasts of 0.3%. The annual PCE rate was 3.4%, in line with forecasts.

Meanwhile, annual core PCE inflation which excludes food and energy, slowed to 3.7%, the lowest reading since May 2021.

PCE inflation is the Fed's preferred inflation metric, and September figures showed that inflationary pressures continue to slowly moderate although the rates remain above the central bank target of 2%.

Is the FED able to control inflation without crashing the economy? Let’s wait and see…

Source: https://tradingeconomics.com/united-states/pce-price-index-monthly-change

 

Financial Markets

Week-on-week, the main stock market indices are down, with the S&P500 losing 2.5%, the NASDAQ 100 down 2.6%, and the RUSSEL 2000 2.6% in the red. Gold is up by 1.3%, now above 2000$ per ounce, and silver lost 1.1%. The barrel of WTI is down 3.6% and is now around 85$ per barrel. Bitcoin rised 14% and is now around ~34200$.

The relative strength of the US dollar rised 0.4% and seems stable. US bond yields moderated slightly, now sitting at 4.84% for the 10-year and 5.02% for the 30-year. The US bond yield curve remains inverted and is now peaking at 5.55% in 6 months from now.


Opinion Section

Despite the relative strength of the US dollar and bond market yields being steady this week, the stock market remains bearish. The earnings season results are mixed. Financial conditions are not easing at the same rate as in previous months, and seem to be stabilizing. As financial conditions get tighter, the need for liquidity will put negative pressure on stock markets and may lead to further bond market selloffs. This will occur over the course of months, and short term bounces should not be confused with new bull markets in either stocks or bonds. Have a nice weekend.


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