Week Ahead
Focus on stocks to set risk on/risk off tone
Geopolitical risk + higher yields after jobs data vs earnings reporting season and support for high valuations
Fed still seen cutting rates in Nov but by 25bps rather than the market fantasy of 50bps
NEW YORK, Oct 4 (Reuters) – A high-stakes corporate earnings season kicks into gear next week, with bullish investors hoping results will justify increasingly rich valuations in a U.S. stock market near record highs.
The case for strong U.S. economic growth got a boost on Friday, after labor market data came in far above expectations. The S&P 500 is up 20% year-to-date and stands near record highs despite recent tumult spurred by rising geopolitical tensions in the Middle East.
Wall St Week Ahead Investors look to earnings to support record-high stock prices
XAUUSD 4 H0UR CHART: TUG-OF-WAR
XAUUSD has traded within 2622-2685, the latter being the new record high, for 7 days in aa row.
Tug-of-war: Higher US yield vs. simmering Middle East geopolitical risk.
While this consolidation will not last, if you view 2600-2700 as a range, then 2650, currently having a magnetic pulll, will eventually dictate the next move.
Newsquawk Week Ahead Highlights for October 7-11
Larry Summers says Fed’s big rate cut was a ‘mistake’ after hot jobs report
The Put to Call Ratio in US stocks bounced off of relative lows from last Friday and so the odds are strong that there will be aggressive selling opening next week without something substantial to support it. An isolated metric but one that holds water usually. Euro likes happy stocks. It does not like mean stocks.
To keep it simple
EURUSD upside is limited a long as it trade below 1.10
USDJPY downside is limited if it can stay above 148 but scaled down interest as long a it is above 147.20
Geopolitical risks ahead of the weekend.
Monday Oct 7 is the one year anniversary of the Hamas attack on Israel, so another reason to be cautious into the weekend.
GVI – 2:13 …….. I was just about to post something to that effect. The activity in UsdJpy is reflecting that with a return so far to what amounts to sideways activity in both spot and in futures and in options and forwards and other metrics. Someone would have a difficult time convincing me we are headed into a rose garden this Friday. Not to sound pessimistic.
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