Market News by OnEquity

Commercial Content Analysts
83

Ripple obtains preliminary license to operate in Dubai

Ripple reported on October 1 that the blockchain company has achieved another regulatory milestone in the United Arab Emirates.

Specifically, the Dubai Financial Services Authority (DFSA) has granted Ripple preliminary approval, allowing the company to expand its services and strengthen its presence in the UAE and the Middle East in general.

The approval means Ripple can now provide its services elsewhere in the country, expanding its presence from the Dubai International Financial Centre (DIFC).

“This is a pivotal moment for Ripple’s operations in the Middle East. The DFSA is a world-renowned independent regulator with a rigorous regulatory process and we are delighted to have received its preliminary approval,” said Reece Merrick, Ripple’s managing director for the Middle East and Africa, in a statement.

According to Merrick, more than 20% of Ripple’s global user base is in the UAE, and the expansion will enable it to bring products and services to an increasing number of individuals and businesses. Among the key innovations will be Ripple’s cross-border payment solutions offering, including the Ripple Payments Direct, or RPD, service.

Ripple’s regulatory compliance

This achievement puts Ripple, the company behind the XRP cryptocurrency , on track to be the first blockchain-based payments provider to be licensed by the DFSA. The UAE is Ripple’s regional headquarters in the MENA region and South Asia, which the company founded in Dubai in 2020.

But in addition to regulatory compliance in the UAE, along with this new license in principle, Ripple has further traction in this pursuit.

The company has obtained more than 55 licenses in various jurisdictions around the world, including the New York Department of Financial Services (NYDFS), the Monetary Authority of Singapore (MAS) and the Central Bank of Ireland (CBI).

84

Dollar Benefits from Safe-Haven Status Amid Middle East Tensions

The U.S. dollar rose on Wednesday, benefiting from its safe-haven status and building on the strong gains from the previous session. This came after a missile attack by Iran on Israel, which further escalated tensions in the region.

Dollar Rises Amid Middle East Escalation

The turmoil in the Middle East intensified overnight, with Iran launching ballistic missiles at Israel in retaliation for the recent assassination of Iranian-backed Hezbollah leader Hassan Nasrallah and Israel’s ground deployment in Lebanon. Iran has reported that its attack is complete unless further provocations occur. However, Israel has promised a response, raising concerns that the United States, one of Israel’s closest allies, could become involved in the regional tensions.

“The escalation in the Middle East has led markets to price in an increased risk of a full-blown conflict in the region, which could involve the U.S.,” analysts at ING said in a note.

The dollar was also supported on Tuesday by better-than-expected U.S. job openings data, especially as markets await the official monthly jobs report due on Friday.

“Although ISM manufacturing data was softer than expected and prices paid fell below 50.0, the Fed is focused on the labor market. The surprising rebound in job openings for August contributes to a near-term bullish case for the dollar,” ING added.

The ADP nonfarm employment report for September is due to be released on Wednesday.

Euro Shows Signs of Stability

In Europe, the EUR/USD traded flat at 1.1067 after experiencing its largest drop in nearly four months on Tuesday. This drop came on further signs of cooling inflation in the eurozone.

The region’s inflation rate fell below the European Central Bank’s (ECB) target of 2.0% in September, and traders will closely watch comments from ECB officials, including Vice President Luis de Guindos and Chief Economist Philip Lane, for more guidance on the central bank’s monetary policy outlook.

Citigroup, in a note published Tuesday, reported that it now expects the ECB to cut interest rates by 25 basis points at its October 17 meeting, with additional cuts expected in December and through early 2025, bringing the policy rate to 1.5% by September 2025.

Meanwhile, GBP/USD was up 0.1% at 1.3293, still well below the previous week’s high of 1.3430, a level not seen since February 2022.

Yen Retreats Amid Interest Rate Uncertainty

USD/JPY rose 0.3% to 144.06 after Japan’s newly appointed Finance Minister, Ryosei Akazawa, said on Wednesday that Prime Minister Shigeru Ishiba expects the Bank of Japan (BOJ) to carefully assess the timing of raising interest rates again.

Minutes from the BOJ’s July meeting, released earlier this week, indicated that policymakers were divided on how quickly the central bank should proceed with further interest rate hikes.

Meanwhile, USD/CNY climbed to 7.0185, with the yuan remaining quiet as Chinese markets are closed for Golden Week, which runs until next Tuesday.

85

U.S. stocks fall on Middle East tensions; Nike, ADP payrolls in center stage

U.S. stocks were lower on Wednesday, with risk sentiment weighed down by escalating tensions in the Middle East, as well as disappointing news from sportswear giant Nike.

The major indexes scored a negative session on Wall Street on Tuesday, the first trading day of the new month and quarter, after Iran launched ballistic missiles at Israel in retaliation for Israel’s strikes against Hezbollah in Lebanon.

The Dow Jones index was down nearly 170 points (0.4%), the S&P 500 index was down nearly 0.9%, and the tech-heavy Nasdaq Composite plunged 1.5%.

Middle East hits risk sentiment

This negative sentiment continued on Wednesday, after Israel’s Prime Minister Benjamin Netanyahu promised retaliation to the airstrikes made by Tehran, stating through a statement that Iran “made a big mistake” and “will pay for it.”

The United States has also mentioned that there will be “serious consequences” for Tehran’s actions, and Defense Secretary Lloyd Austin added that Washington is “well prepared” to defend its interests in the Middle East.

Although the situation may escalate further, UBS expects that “it will not come to an all-out war between Israel and Iran, including their respective allies.”

Nike withdraws its forecasts

Equally weighing on risk appetite was disappointing news from Nike (NIKE), after the U.S.-based apparel maker withdrew its full-year forecast and posted a 10% drop in quarterly revenue.

As a result, its shares fell by more than 5% before the market opened.

The results come at a time when Nike is undergoing an executive-level shake-up in which chief Jhon Donahoe will be replaced by company veteran Elliott Hill. Donahoe had survived a period of weak results underpinned by stiff competition in the $150 billion-a-year global sneaker market.

ADP Payrolls

The monthly ADP private payrolls release will provide further insight into the state of the nation’s labor market.

The ADP private payrolls release will provide more information regarding the current state of the U.S. labor market ahead of Friday’s non-farm payrolls release, which will likely signal the direction of the market ahead of the Federal Reserve’s next interest rate meeting.

Oil prices soar on turmoil in the Middle East

Crude oil prices rose on Wednesday on escalating tensions in the Middle East. Meanwhile, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, will meet later in the session, although no changes in production are expected for the time being.

U.S. crude inventories fell by about 1.46 million barrels in the week ended September 27, contrary to expectations for a decline of about 2.1 million barrels, according to data from the American Petroleum Institute.

The official government inventories report is due later in the session.

86

Cryptocurrency markets reeling from global uncertainty over Middle East conflict

Bitcoin plummets as the market reacts to the ongoing conflict between Israel and Iran. On a macroeconomic level, cryptoasset markets have been shaken due to the escalation of geopolitical tensions between Iran and Israel, which has challenged the notion of Uptober and raised doubts about the role of digital assets such as cryptocurrencies in times of global crisis.

As the conflict unfolds, the collateral effects are being felt in all financial markets, and some cryptocurrencies and ETFs are experiencing considerable volatility.

Market impact and consolidations

The immediate response to Iran’s missile strike against Israel sent the Bitcoin down to around $60,200, which seems to indicate a considerable 6% decline from recent highs around $64,000. This drop was not just Bitcoin’s, as Ethereum and other alcoins posted losses, with Ethereum falling more than 4% and Solana down 5%.

The market turmoil generated massive liquidations, with Coinglass reporting that $523.37 million was lost in just 24 hours. Long positions bore the brunt, with $451 million liquidated, compared to $71 million in short positions. This volatility generated the liquidation of 154,011 traders, demonstrating the huge impact of the ongoing crisis on the cryptocurrency market.

The rapid market decline has significantly changed investor sentiment. The cryptocurrency fear and greed index, a vital measure for analyzing market sentiment, dropped from a “greed” level of 61 to a “fear” level in a span of 42 days. This considerable shift highlights the market’s sensitivity to external geopolitical level events and their broad influence on investor behavior.

Additionally, U.S. spot Bitcoin ETFs recorded considerable outflows, with added withdrawals of $242.53 million on October 1 alone. This marked the largest outflow in nearly a month and the third largest in five months, signaling a broader pullback from cryptoassets amid heightened global uncertainty.

Macroeconomic implications and outlook for the future

The current crisis calls into question the concept that cryptocurrencies, and especially Bitcoin, are a safe haven during troubled times around the world. Although some of its advocates have long argued that Bitcoin’s decentralized nature makes it an ideal hedge against geopolitical risks and tensions, its most recent behavior seems to indicate the opposite.

However, not all analysts see this fall as a long-term setback. For example, André Dragosch, European head of research at Bitwise, points out that Bitcoin has historically shown resilience in recovering from geopolitical turbulence.

87

Dollar steady on payrolls hikes; euro eases on weak data

The U.S. dollar stabilized on Monday, holding on to the gains seen after Friday’s strong jobs report, at the start of a week that brings the release of key inflation data, as well as minutes from the Federal Reserve’s latest meeting.

Payrolls help boost the dollar

The growth in U.S. payrolls ended fears of a slowdown in the U.S. economy and served to reinforce the notion that the Federal Reserve will not need to cut interest rates sharply to sustain the economy, which served to boost the dollar.

According to the Fedwacth tool, traders largely dismissed bets on a further 50 basis point cut at the next Fed meeting and estimated the option of a 25 basis point cut at more than 90%.

This week, the focus will be on speeches by several Fed officials, inflation data and the minutes of the September meeting. The Fed cut rates by about 50 basis points at the meeting and signaled the beginning of an easing cycle, although it continues to say that future rate cuts will be data dependent.

Analysts at ING say in a note that “Friday’s extraordinary U.S. jobs report triggered the kind of repricing of rate expectations that we thought would materialize in a few weeks.”

“Markets no longer have an excuse to look through Fed Chair Jerome Powell’s pushback against the 50 basis point cuts, and are now finally aligned with the Dot Plot projections: 25bp cuts in November and December.”

The dollar, sheltering second, has similarly received a boost from the turmoil in the Middle East, with Israel carrying out bombing raids against Hezbollah targets in Lebanon and the Gaza Strip on Sunday, ahead of Monday’s one-year anniversary of the October 7 attacks that kicked off the war.

Weak German data hits the euro

In Europe, the EUR/USD, down 0.1% at 1.0965, and the euro weakened after German factory orders fell about 5.8% on month in August, another example of the economic difficulties facing the largest economy in the eurozone.

ECB chief economist Philip Lane, as well as board members Piero Cipollone and Jose Luis Escriva are scheduled to speak later on Monday, and are likely to follow President Christine Lagarde in signaling a rapid pace of additional easing.

GBP/USD retreated slightly to 1.3113 after suffering a 1.9% drop the previous week, posting its biggest decline since early 2023.

Bank of England chief economist Huw Pill said Friday that the central bank should only gradually cut interest rates, a day after it said Governor Andrew Bailey may move more aggressively to reduce borrowing costs.

Questions about the Bank of Japan’s rate hike.

USD/JPY fell 0.3% to 148.22, retreating after hitting its highest level since mid-August. The yen was hit by growing doubts about the Bank of Japan’s ability to continue raising interest rates in the coming months, especially amid uncertainty about the upcoming Japanese general election.

USD/CNY was virtually flat at 7.0176, with Chinese markets still closed for the Golden Week celebrations.

88

U.S. Stock Markets Down: Fed, Inflation, Earnings in Spotlight

U.S. stock index futures were lower on Monday, shedding some of the previous week’s gains following strong payrolls data, with attention focused on more hints on interest rates and corporate earnings in the coming days.

Wall Street rose sharply on Friday after better-than-expected nonfarm payrolls data eased concerns about a slowing U.S. economy but reduced the likelihood of sharper interest rate cuts in the coming months.

Goldman Sachs strategists cut their 12-month recession probability by 5 percentage points to 15% in the wake of the September jobs report.

“September’s strong employment gains and upward revisions have for now calmed fears that labor demand may be too weak to prevent the unemployment rate from trending higher,” the strategists reported in a note.

On Friday, the Dow Jones index rose 0.8%; the S&P 500 index gained 0.9%, just below record levels, and the NASDAQ Composite index rose 1.2%.

Fed Comments and CPI Inflation

This week, the focus will be on new signals from the Federal Reserve, with several policymakers taking the floor in the coming days. Rate-setting committee members Michelle Bowman and Neel Kashkari will speak on Monday, as will Raphael Bostic.

Their speeches will come ahead of the release of the minutes of the Fed’s September meeting, scheduled for Wednesday. While no rate cut was made, the minutes will provide insight into the Fed’s future policy direction.

This week will also see the release of consumer price index inflation data for September, which will likely influence estimates for the path of U.S. interest rates.

Banks Start the Third Quarter Earnings Season

This week marks the start of the third-quarter earnings season, with major banks JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of New York Mellon (BK) releasing their quarterly results next Friday. Markets will be watching for resilience in corporate earnings in the face of pressure from high interest rates and continued inflation.

Bullish investors expect the results to help justify the stock market’s rising valuations. The S&P 500 is up 20% so far this year and trading near record highs, despite recent volatility generated by heightened geopolitical tensions in the Middle East.

Oil Prices Rise

Oil prices rose again on Monday, adding to last week’s strong gains, as traders monitor continued tensions in the Middle East. Oil prices last week recorded their biggest weekly gain in nearly a year amid the growing threat of a regional war in the Middle East. Tensions have escalated in the region, with concerns over further conflict involving Iran and Hezbollah in response to recent developments.

89

Cryptocurrencies Exempted from VAT in the United Arab Emirates

The UAE has exempted cryptocurrency transfers and conversions from value-added tax (VAT), making it a more cryptocurrency-friendly jurisdiction for digital asset transactions. The amendments to the UAE’s VAT regulations will exempt transfers and conversions of digital assets, including cryptocurrencies.

On October 2, the UAE’s Federal Tax Authority (FTA) made public the amendments to the country’s VAT rules. According to business consultancy PwC, the new rules provide for VAT exemptions for additional services, including investment fund management and the transfer and conversion of virtual assets. PwC highlighted that the exemptions on the transfer and conversion of virtual assets will apply retroactively as of January 1, 2018.

Tax Recovery for Virtual Asset Companies

The audit firm detailed that in the UAE, virtual assets are defined as a “representation of value that can be traded or digitally transferred and can be used for investment purposes.”

However, the definition does not cover fiat currencies or financial securities.

The audit firm recommended that companies dealing in virtual assets analyze the exemption in their past VAT filings. PwC added that virtual asset companies should pay particular attention to the collection of their input tax.

UAE-based accounting and tax firm Finanshels noted that in the UAE, input tax collection authorizes registered companies to refund the VAT they have already paid on eligible business purchases.

In addition, PwC said that correcting historical returns may require voluntary disclosures by virtual asset companies.

United Arab Emirates Improves Cryptocurrency Regulations

In addition to VAT exemptions, UAE regulators have been modernizing and simplifying their rules on virtual assets. On September 9, the Dubai Virtual Assets Regulatory Authority (VARA) and the Securities and Commodities Authority (SCA), the UAE’s federal financial agency, reached an agreement to jointly supervise virtual asset service providers (VASPs). Under the agreement, VASPs operating in Dubai that acquire a license from VARA can also provide services in the rest of the UAE by being registered by default with the SCA.

Meanwhile, VARA has also tightened its rules on cryptocurrency trading. On September 26, the regulator stated that companies promoting investments in digital assets must incorporate a prominent notice in their material. The notice must highlight that “virtual assets may lose their value in whole or in part and are subject to extreme volatility.”

The new tax policies come amid efforts by the United Arab Emirates (UAE) to push for new regulations in the digital currency sector and transform itself into the next financial technology innovation hub. In 2022, Dubai became a pioneer in the region by establishing the Virtual Assets Regulatory Authority (VARA) and issuing a cryptocurrency regulatory framework.

The rules set a specific licensing regime for exchanges. Recently, the VARA tightened its rules on cryptocurrency trading, requiring companies promoting investments in digital assets to add a disclaimer to their material.

90

Dollar Falls from Highs, Euro Gains on Strong German Data

The U.S. dollar declined on Tuesday, though it remained near seven-week highs, as market traders analyzed the Federal Reserve’s monetary policy estimates following last week’s strong employment report.

The Dollar Appears to Be Pausing

Friday’s strong payrolls report prompted traders to reassess the Fed’s rate-cutting path, with a 50 basis point cut in November mostly ruled out in favor of a 25 basis point reduction. The benchmark 10-year Treasury yield, reflecting moderate expectations, held above 4% on Tuesday, while the two-year yield reached its highest level in over a month. This, along with escalating tensions in the Middle East affecting risk sentiment, has helped boost the dollar.

Later this week, several Federal Reserve members will speak, along with the release of September’s inflation report and the minutes from the U.S. central bank’s previous meeting. ING analysts noted, “We have seen a fairly limited impact on the FX market from US 10-year yields hitting the 4% mark, which appears to be the tail end of the payrolls-induced move that has already triggered some considerable repositioning in dollar crosses.”

The analysts added, “There is a possibility that the FX market will cease to be guided by rates now that the Fed’s new 25 basis point per meeting rate path has become the market benchmark. We suspect that this week’s inflation data will not cause major directional changes in the dollar, which may instead respond more to the turmoil in the Middle East and the resulting moves in oil prices.”

The Euro Benefits from German Industrial Production

In Europe, the EUR/USD rose 0.2% to 1.0995. The euro benefited from the release of better-than-expected industrial production data in Germany, as the August figure increased by more than 2.9% more than estimated compared to last month.

Moreover, the less volatile quarter-on-quarter comparison revealed that output was 1.3% lower in the June to August period than in the previous three months.

The European Central Bank meets next week and is expected to ease policy once again, having already cut rates twice this year, as inflation pressures have eased.

GBP/USD and Yuan Developments

GBP/USD was up 0.2% at 1.3104, moving away from Monday’s three-week low of 1.3059. Data released on Tuesday revealed that UK retail sales rose at their fastest pace in six months during September, with total sales rising 2% year-on-year, helped by a 3.1% rebound in food retailers, while non-food transactions fell 0.3%.

USD/JPY fell nearly 0.4% to 147.55, giving back some of the strong gains posted the previous week. Data related to wage growth and household spending also supported Japan’s currency. USD/CNY rose 0.5% to 7.0506 as trading resumed after the weeklong holiday. Sentiment towards China was boosted by a series of stimulus measures from Beijing, including lower interest rates, though this added further pressure on the yuan, especially as US interest rates are now expected to continue rising.

91

U.S. Stock Markets Rise, Fed to Make Key Announcements

U.S. stock markets and indexes rose on Tuesday, stabilizing after the previous session’s losses, as a strong payrolls report raised doubts about the Federal Reserve’s plans to sharply cut interest rates.

Bets on a smaller rate cut caused Wall Street to post steep losses on Monday, with the S&P 500 down about 1%, the NASDAQ Composite down 1.2%, and the Dow Jones Industrial Average losing nearly 400 points, or 0.9%, from record highs.

Rising Treasury yields also weighed, with the benchmark 10-year Treasury yield above 4% on Tuesday, while the two-year yield hovered around its highest level in more than a month.

Risk sentiment was similarly affected by fears of an escalation of conflict in the Middle East, as well as concerns over another major hurricane expected to make landfall in the U.S. this week.

Federal Reserve Officials Set to Speak

Tuesday will see little economic data that could affect interest rate expectations, with the Fed’s September meeting minutes due on Wednesday and the consumer price index for September on Thursday.

Nonetheless, the week is full of Fed speakers, including Boston Fed President Susan Collins and Atlanta Fed President Raphael Bostic.

Traders estimate an 80.9% chance that the Fed will implement a 25 basis point rate cut in November and a 19.1% chance of no rate cut, according to CME FedWatch.

Traders were also pricing in a higher terminal rate for the Fed’s current easing cycle.

The Fed maintained its rates in September, signaling the start of a potential easing cycle. However, it continues to indicate that future rate cuts will depend on incoming data.

Honeywell Considers Spinning Off a Unit – WSJ

In corporate news, Honeywell (HON) shares rose 2% before the market opened after the Wall Street Journal reported that the conglomerate is considering spinning off its advanced materials business.

Alphabet (GOOG) will be in the spotlight after a U.S. judge ordered its Google unit to reconfigure its Android operating system to allow rivals to create their own app marketplaces and payment options, which is a setback for the tech giant’s defense against antitrust lawsuits.

Third-quarter earnings season will likewise begin later this week, with major banks reporting.

Oil Prices Lose Ground

Oil prices declined on Tuesday as traders took profits after a sharp rise triggered by concerns that an all-out war in the Middle East could impact oil supplies.

Weak reactions to comments from the state economic planner of China, the world’s largest oil importer, also weighed on crude.

The American Petroleum Institute will release the latest reports on U.S. crude inventories, with analysts estimating that stockpiles will increase by 1.9 million barrels.

92

Today’s Stocks to Watch: LVMH, Alibaba, and DocuSign

LVMH and Rémy Cointreau stocks hit by China’s tariffs on European brandy. Alibaba and other Chinese tech stocks fall on loss of momentum in the Chinese market. DocuSign joins the S&P MidCap 400, replacing MDU Resources Group.

LVMH and Rémy Cointreau face new tariffs from China

China announced new tariffs on brandy imports from the European Union, affecting Rémy Cointreau (RCO) shares, which fell 8%. LVMH, owner of Hennessy (MC), lost more than 3%.

Alibaba and other Chinese technology companies declined

Stocks of U.S.-listed Alibaba (BABA), PDD, and JD were down more than 9% in premarket trading due to the Chinese market showing signs of weakness, reversing some recent gains.

Honeywell unveils spin-off of advanced materials division

Honeywell (HON) plans to spin off its advanced materials division, The Wall Street Journal reports. The announcement sparked a surge in its shares even before the market opened.

DocuSign enters the S&P MidCap 40

DocuSign (DOCU) will replace MDU Resources Group in the S&P MidCap 400 next Friday, according to data from S&P Dow Jones Indices. Following the announcement, DocuSign shares rose 5% in premarket trading, while MDU shares were flat.

Freeport-McMoRan and Alcoa down on commodity sales

Stocks of Freeport-McMoRan (FCX) and Alcoa (AA), mining companies, fell more than 4% in trading due to a massive sell-off in commodities such as copper, driven by weakening bullish sentiment ahead of stimulus measures in China.

Super Micro Computer continues to rise on strong demand for servers

Stocks of Super Micro Computer (SMCI) rose nearly 3% in premarket trading, following a 16% gain on Monday. The company has installed more than 100,000 liquid-cooled graphics processing units in artificial intelligence factories.

PepsiCo readjusts forecasts after sales drop

PepsiCo (PEP) has cut its outlook for the year after announcing an unforeseen sales decline over the summer, sending its shares tumbling in the premarket session.

93

Dollar rises pending Fed minutes; euro devalues

The U.S. dollar rose on Wednesday, in expectation of the analysis of U.S. interest rate estimates, at the same time the euro lost ground.

The dollar awaits the Fed minutes

The dollar has seen a surge in demand since last week’s strong Friday payrolls report led the market to largely dismiss the option of another 50 basis point cut for November in favor of a much more traditional 25 basis point reduction.

According to CME’s FedWatch tool, investors at this time now estimate an 85% chance that a quarter basis point cut will be made, as well as a small chance that the Fed will keep rates unchanged.

Attention is now focused on the release of the minutes from the Fed’s September meeting, scheduled for later in the session.

During this meeting, the Fed made the determination to cut rates by 50 basis points, and the minutes are likely to show the reasons behind this decision. That said, Fed policymakers have been overly active over the past few days, so it may be debatable whether the minutes can provide anything new.

On Thursday, the consumer price index for September will be released, which is also likely to influence the Fed’s outlook.

Euro slips ahead of European Central Bank meeting

In Europe, the EUR/USD was down 0.2% to 1.0962, with the euro depreciating on the back of better-than-expected German trade data, which raised hopes of a recovery in the eurozone’s largest economy.

Exports in Germany rose by 1.3% in August on month-on-month levels, according to official data revealed Wednesday, defying estimates of a 1.0% drop.

The European Central Bank will meet next week and is expected to ease monetary policy again, after cutting rates twice this 2024, due to weakening economic growth and easing inflationary pressures.

“A cut is very likely and it won’t be the last, the pace will depend on how the fight against inflation progresses,” ECB policymaker Francois Villeroy de Galhau said in an interview on Wednesday.

GBP/USD fell 0.2% to 1.3081, not far from Monday’s three-week low of 1.3059.

“The British press is starting to reach a feverish pitch with its speculation about what Chancellor Rachel Reeves will present in her first budget on Oct. 30,” analysts at ING mentioned, in a note.

“Investors remain on the lookout for any signs that the U.K. Gilt market is once again getting nervous about potential spending plans.”

New Zealand dollar falls on the back of rate cut

NZD/USD was down 0.9% at 0.6085, with the Kiwi dollar hitting its lowest level on record since August 19 after the Reserve Bank of New Zealand cut interest rates by 50 basis points and left the door open to even more aggressive monetary easing.

USD/JPY rose 0.2% to 148.53 after touching a seven-week high of 149.10 on Monday. The yen could see volatility in the weeks ahead as Japan is due to hold an election on October 27, ahead of the Bank of Japan’s monetary policy meeting. On top of this, there is the US presidential election next month.

USD/CNY rose 0.1% to 7.0643, after the pair gained 0.6% in the previous session as trading resumed in full swing after the Golden Week vacation.

94

U.S. stock markets down ahead of Fed minutes; Google faces its breakup

Stock markets and indices declined in the U.S. on Wednesday, following last session’s gains, in anticipation of further signals from the Federal Reserve on interest rates.

The broad S&P 500 index rose 1%, while the tech-heavy Nasdaq Composite gained 1.4% and the Dow Jones Industrial Average gained about 0.3%.

Ahead of the Fed minutes

Markets were now awaiting further signals on U.S. interest rates amid increasing doubts about the Federal Reserve’s plans to cut rates sharply in the coming months.

Minutes from the Fed’s September meeting will be released this Wednesday, when several officials are also due to speak.

The strong payrolls data released last week raised doubts about the Fed’s impetus to continue lowering rates at a faster pace. According to FedWatch’s CME, traders have an 81.1% chance of a 25 basis point cut in November and about an 18.9% chance of no change.

The Fed cut rates by 50 basis points last month and indicated that future cuts will depend on both inflation and the labor market.

On Thursday, the consumer price index for September will be released.

Google facing a possible breakup

Google could break up, as the U.S. Department of Justice is looking into possible sanctions against its owner Aphabet (GOOG), following a landmark antitrust case that found the group guilty of abusing and profiting from its dominant market position. The DOJ is “considering structural and behavioral remedies” that would not allow Google to use products such as its web browser, app store or operating system to benefit its search business over its competitors, according to a federal court filing Tuesday.

“For more than a decade, Google has controlled the most popular distribution channels, leaving its rivals with little or no incentive to compete for users,” the DOJ added. Separately, global miner Rio Tinto (NYSE:RIO) has agreed to acquire its U.S. counterpart Arcadium Lithium (NYSE:ALTM) in a $6.7 billion cash deal, according to a statement released Wednesday.

This week, attention is also focused on the start of third-quarter earnings season, with a number of major banks set to report their results on Friday.

Oil prices rebound on expectations of U.S. inventories

Oil prices rose on Wednesday, recovering from some of the previous session’s sharp losses, although signs of a large increase in U.S. inventories have dampened gains. Separately, data from the American Petroleum Institute released Tuesday revealed that U.S. crude inventories rose by 10.9 million barrels last week, well ahead of forecasts that expected an increase of 1.95 million barrels.

Official data from the Energy Information Administration will be released later in the session, and could raise concerns about cooling fuel demand in the U.S., especially as the South faces a series of devastating hurricanes.

95

Today’s stocks to watch: Alphabet, Boeing and Rio Tinto

Key points:

  • Worker strikes cost Boeing $1 billion per month, affecting its stock.
  • Alphabet faces possible dismantling by the Department of Justice due to allegations of monopoly.
  • Rio Tinto expands in the lithium market with the acquisition of Arcadium, while shares of Chinese companies fall in the United States.

Justice considers action against Alphabet

Alphabet (GOOGL): The Justice Department is considering breaking up Google, along with other restrictions, to end what it calls an illegal monopoly in search, according to a court document filed Tuesday. Stocks of parent Alphabet were down 1% before the market opened.

Boeing faces strikes and million-dollar costs

Boeing (BA): The aircraft builder withdrew a wage increase offer for striking workers, stating that the machinists’ union presented “demands far beyond what can be accepted.” Ratings firm S&P estimated Tuesday that the strikes could cost Boeing $1 billion a month. Stocks were down 1.5% in premarket trading.

Rio Tinto expands its presence in the lithium market

Rio Tinto (RIO) and Arcadium Lithium (ALTM): The Anglo-Australian miner agrees to purchase Arcadium for US$6.7 billion. This deal will enable Rio Tinto to become a major producer of a key resource used in electric vehicle batteries. Rio Tinto’s U.S. shares were down slightly in pre-market trading, while Arcadium’s shares soared 30%.

Chinese market slump impacts Alibaba, JD. com and NIO

Alibaba (BABA), JD. com (JD), NIO (NIO): Stocks of U.S.-listed Chinese companies were down in pre-opening trading, following sharp declines on Tuesday, on waning enthusiasm for Beijing’s stimulus plans, which have continued to weigh on Chinese markets.

96

U.S. Dollar Strengthens as Key Economic Reports Loom

The U.S. dollar rose on Wednesday in anticipation of U.S. interest rate estimates, while the euro lost ground. The dollar has seen a surge in demand since last week’s strong Friday payrolls report led the market to largely dismiss the option of another 50 basis point cut for November in favor of a much more traditional 25 basis point reduction.

According to CME’s FedWatch tool, investors currently estimate an 85% chance of a quarter basis point cut, with a smaller possibility that the Fed will keep rates unchanged.

Attention is now focused on the upcoming release of the minutes from the Fed’s September meeting, scheduled for later in the session.

During this meeting, the Fed decided to cut rates by 50 basis points, and the minutes are likely to reveal the rationale behind this decision. However, with policymakers having been active recently, it’s debatable whether the minutes will offer any new information.

On Thursday, the consumer price index for September is set to be released, which is also expected to influence the Fed’s outlook.

Euro Slips Ahead of ECB Meeting

In Europe, the EUR/USD was down 0.2% to 1.0962, with the euro depreciating on the back of better-than-expected German trade data, which raised hopes of a recovery in the eurozone’s largest economy.

Exports in Germany rose by 1.3% in August on month-on-month levels, according to official data revealed Wednesday, defying estimates of a 1.0% drop.

The European Central Bank will meet next week and is expected to ease monetary policy again, after cutting rates twice this 2024, due to weakening economic growth and easing inflationary pressures.

“A cut is very likely and it won’t be the last, the pace will depend on how the fight against inflation progresses,” ECB policymaker Francois Villeroy de Galhau said in an interview on Wednesday.

GBP/USD fell 0.2% to 1.3081, not far from Monday’s three-week low of 1.3059.

“The British press is starting to reach a feverish pitch with its speculation about what Chancellor Rachel Reeves will present in her first budget on Oct. 30,” analysts at ING mentioned, in a note.

“Investors remain on the lookout for any signs that the U.K. Gilt market is once again getting nervous about potential spending plans.”

Kiwi Dollar Falls After Rate Cut

The New Zealand dollar (NZD/USD) dropped 0.9% to 0.6085, reaching its lowest level since August 19 after the Reserve Bank of New Zealand cut interest rates by 50 basis points. The central bank left the door open for further aggressive monetary easing, heightening concerns over future policy moves.

USD/JPY rose 0.2% to 148.53, after touching a seven-week high of 149.10 on Monday. The yen is expected to face volatility in the coming weeks as Japan prepares for an election on October 27, ahead of the Bank of Japan’s monetary policy meeting. Additionally, the U.S. presidential election next month is expected to add further uncertainty to the markets.

USD/CNY increased by 0.1% to 7.0643, following a 0.6% gain in the previous session. Trading resumed in full force after the week-long Golden Week vacation, pushing the pair higher.

97

U.S. Stock Markets Decline Ahead of Fed Minutes, Google Faces Potential Breakup

U.S. stock markets declined on Wednesday, reversing the previous session’s gains, as investors braced for further signals from the Federal Reserve regarding interest rate policy.

The broad S&P 500 index dropped 1%, while the tech-heavy Nasdaq Composite fell by 1.4%, and the Dow Jones Industrial Average slipped about 0.3%.

Stock Markets Slip as Investors Await Federal Reserve Signals

Markets are particularly focused on the release of the Federal Reserve’s September meeting minutes, expected later today, which will provide crucial insight into the central bank’s future plans for interest rates.

Doubts about the Federal Reserve’s intentions to cut rates sharply have increased following last week’s stronger-than-expected payrolls report. According to CME’s FedWatch tool, there is an 81.1% chance of a 25 basis point cut in November, with an 18.9% chance of no change.

The Federal Reserve cut rates by 50 basis points last month and signaled that future rate decisions would depend on inflation and labor market conditions. Additionally, the consumer price index for September is set to be released on Thursday, which will likely influence future policy decisions.

Google Faces Potential Breakup Following DOJ Antitrust Case

Google may face a forced breakup as the U.S. Department of Justice considers potential sanctions against its parent company, Alphabet (GOOG), following a landmark antitrust ruling. The case found Alphabet guilty of abusing its dominant position in the search and digital advertising markets. The DOJ is reportedly exploring “structural and behavioral remedies,” which could prevent Google from using its other platforms, such as its web browser, app store, and operating system, to unfairly promote its search services.

The DOJ argued that Google has controlled the most prominent distribution channels for over a decade, leaving competitors with little incentive to vie for users. The proposed remedies could significantly impact Google’s business model and market dominance. In a separate development, global miner Rio Tinto (NYSE) agreed to acquire U.S.-based Arcadia Lithium (NYSE) for $6.7 billion in a cash deal, further consolidating its position in the mining sector.

Oil Prices Rebound Amid U.S. Inventory Concerns

Oil prices rebounded on Wednesday, recovering from sharp losses earlier in the week. However, the gains were tempered by signs of a significant rise in U.S. crude inventories. Data from the American Petroleum Institute revealed that U.S. crude inventories surged by 10.9 million barrels last week, far exceeding the expected 1.95 million barrel increase. While oil prices recovered some ground, concerns about oversupply and cooling demand in the U.S. continue to loom large.

Official data from the Energy Information Administration, due to be released later in the session, could further impact oil markets, especially as the U.S. South prepares for a series of potentially severe hurricanes.

Third-Quarter Earnings Season Begins

Investors are also turning their attention to the third-quarter earnings season, which kicks off this week with several major banks set to report their results on Friday. These reports will be closely watched for any indications of how companies are faring amid economic uncertainty and fluctuating interest rates. The earnings season is expected to set the tone for market sentiment in the coming weeks.

98

Today’s Stocks to Watch: Alphabet, Boeing, and Rio Tinto

Key points:

  • Worker strikes cost Boeing $1 billion per month, affecting its stock.
  • Alphabet faces possible dismantling by the Department of Justice due to allegations of monopoly.
  • Rio Tinto expands in the lithium market with the acquisition of Arcadium, while shares of Chinese companies fall in the United States.

DOJ Considers Action Against Alphabet

Alphabet (GOOGL) faces potential government intervention as the U.S. Department of Justice considers breaking up Google to end what it describes as an illegal monopoly in search. The move, which is detailed in a court document filed Tuesday, may also include restrictions on how the company operates its platforms. Shares of parent company Alphabet were down 1% in premarket trading as investors reacted to the news.

Boeing Faces Billion-Dollar Costs from Worker Strikes

Boeing (BA) is facing substantial financial losses due to ongoing worker strikes. The aircraft manufacturer withdrew its wage increase offer to striking workers, claiming that the machinists’ union presented “unreasonable demands.” Ratings firm S&P estimates that the strikes could cost Boeing $1 billion per month. Shares of Boeing were down 1.5% in premarket trading as concerns over the financial impact mounted.

Rio Tinto Expands in the Lithium Market with Arcadia Acquisition

Rio Tinto (RIO) has entered into an agreement to acquire Arcadia Lithium (ALTM) for US$6.7 billion. This strategic acquisition allows Rio Tinto to solidify its position as a major player in the lithium market, a crucial resource for electric vehicle batteries. In response to the news, Rio Tinto’s U.S. shares dipped slightly in premarket trading, while Arcadia’s shares jumped 30%.

Chinese Market Slump Impacts Alibaba, JD. com, and NIO

Alibaba (BABA), JD. com (JD), and NIO (NIO) saw their U.S.-listed shares decline in premarket trading following steep losses on Tuesday. Investors are becoming increasingly skeptical of Beijing’s stimulus plans, which have so far failed to reverse the slowdown in the Chinese economy. This pessimism continues to weigh heavily on Chinese stocks traded in the United States.

99

Dollar Falls from Highs, Euro Under Pressure on Weak Inflation Data

The U.S. dollar fell from recent highs on Tuesday as weak regional inflation data weighed on the euro ahead of the European Central Bank (ECB) meeting.

Dollar Falls from Highs

In recent weeks, demand for the U.S. dollar has been boosted by employment and inflation data, which suggest a slower pace of rate cuts by the Federal Reserve. This follows the Fed’s decision to cut rates by 50 basis points in September, marking the start of an easing cycle.

Fed Governor Christopher Waller reiterated this cautious approach on Monday, emphasizing the need for more gradual rate cuts in the coming months. Waller suggested that the central bank should reduce rates only slowly over time.

The U.S. economic calendar is relatively quiet on Tuesday, although several Federal Reserve speakers, including FOMC members Mary Daly and Raphael Bostic, are scheduled to speak.

According to CME Fedwatch, traders see an 86.8% chance of a 25 basis point rate cut by November, with a 13.2% chance of rates remaining unchanged.

Euro Declines Ahead of ECB Meeting

In Europe, EUR/USD was down 0.2% to 1.0892 following the release of weak regional inflation data, which increased the likelihood of further rate cuts by the ECB, starting as soon as Thursday.

Consumer prices in France fell more than initially estimated in September, with the harmonized consumer price index revised down to 1.4%, its lowest level since early 2021. Similarly, consumer prices in Spain fell below the ECB’s 2.0% target, while wholesale prices in Germany declined by 1.6% in September compared to the same period last year, indicating minimal underlying price pressures in the eurozone’s largest economy.

The ECB has already cut rates twice this year, and financial markets fully expect another 3.5% deposit rate cut later this week.

“The euro is losing ground ahead of Thursday’s ECB meeting and has now made a decisive break below 1.090,” analysts at ING said in a note.

“Rising rate differentials with the dollar are clearly shifting EUR/USD strategic positioning, with CFTC data showing that net long positions have fallen from 13.5% to 5.9% of open interest since the beginning of September.”

GBP/USD Slightly Higher

GBP/USD rose 0.1% to 1.3070 after the UK unemployment rate unexpectedly fell to 4% in August, down from 4.1%, indicating underlying strength in the labor market. However, the decline in average earnings could pave the way for a further interest rate cut when the Bank of England meets next month.

The fall in average earnings may open the door to an interest rate cut when the Bank of England meets in November, provided Wednesday’s consumer inflation data does not deliver an upside surprise.

Yuan Under Pressure

USD/CNY rose 0.4% to 7.1156, with the yuan under pressure due to uncertainty surrounding China’s fiscal stimulus plans. The Ministry of Finance has yet to provide key details regarding the timing and phasing of the anticipated measures.

China’s economy has also been impacted by a series of weak economic data. Monday’s figures showed that China’s trade balance contracted more than expected in September, with a sharp slowdown in export growth. Previous data indicated that the country’s disinflationary trend continues.

USD/JPY fell 0.4% to 149.11, with the yen recovering slightly after the currency pair threatened to break above resistance at the 150 level.

100

U.S. stock markets stabilize ahead of quarterly earnings results

U.S. stock index futures and equities stabilized on Tuesday, consolidating after a rally in technology stocks moved to all-time highs on Wall Street last session ahead of some major company data.

The major indexes posted solid gains on Monday, supported by strong gains in major technology vlores, with market favorite Nvidia (NVDA) rising to an all-time high, coming close to replacing iPhone maker Apple (AAOL) as the world’s most valuable company.

The S&P 500 rose 0.8% to an all-time high, the Dow Jones Industrial Average rose 0.5% to an all-time high above 43,000 points, while the NASDAQ Composite rose 0.9% again, close to the all-time highs achieved earlier in the year.

In addition to technology gains, stock markets were also boosted by continued bets that the Federal Reserve will cut interest rates next month.

Q3 earnings in the spotlight

Investors’ attention is now focused on the third quarter earnings season, which kicks off in earnest on Tuesday.

Financial giants Bank of America (BAC), Goldman Sachs (GS), Citigroup (C) and Charles Schwab (SCHW) will report their results on Tuesday, as will Johnson & Johnson (JNJ), United Airlines (UAL), Unitedhealth (UNH) and Walgreens Boots Alliance (WBA).

Morgan Stanley (MS) rounds out bank earnings on Wednesday, while Netflix (NFLX), Blackstone (BX) and American Express (AXP) will release results later in the week.

Investors will be watching to see if company earnings persevere despite the backdrop of pressure from high interest rates and sticky inflation.

This week, aside from earnings, attention will focus on retail sales data, as well as speeches from a number of Federal Reserve officials, looking for more signals on the economy along with interest rates.

Oil prices fall on demand fears

Oil prices fell sharply on Tuesday, adding to their recent losses on concerns about slowing demand growth, particularly from top exporter China.

These fears were compounded by the Organization of the Petroleum Exporting Countries cutting its crude oil demand expectations for the third successive month.

Oil prices were also influenced by the risk premium that traders discounted on Monday’s news that Israel will not attack Iran’s oil and nuclear facilities. Such an attack would escalate the conflict and alarm investors about a supply disruption from the oil-rich region.

101

Today’s Stocks to Watch: J&J, Boeing, and Goldman Sachs

Key points:

  • A number of energy stocks and Chinese companies posted significant market declines.
  • Boeing and Goldman Sachs shares posted notable gains.
  • UnitedHealth and J&J readjusted their earnings forecasts due to external factors.

Boeing Aims to Raise $10 Billion

Boeing (BA) plans to raise at least $10 billion through the sale of new shares. This strategy aims to stabilize its finances after a period of instability. Shares rose nearly 1% in after-hours trading.

Goldman Sachs Reports a 45% Increase in Profits

Goldman Sachs (GS) announced a 45% increase in quarterly earnings, exceeding market expectations. Stocks were up more than 3% in pre-market trading.

Bank of America Beats Expectations Despite Profit Decline

Bank of America (BAC) posted a decline in quarterly earnings, despite beating expectations. The stock was up nearly 2% in pre-market trading.

UnitedHealth Revises Profit Forecast Following Cyberattack

UnitedHealth (UNH) lowered its earnings expectations due to ongoing disruptions caused by a cyberattack. Stocks were down more than 3% in after-hours trading.

Johnson & Johnson Posts Profit but Cuts Annual Outlook

Johnson & Johnson (JNJ) reported better-than-expected quarterly sales and earnings but reduced its annual profit forecast. Stocks were down about 1% in after-hours trading.

Walgreens Boots Alliance Confirms Adjusted Earnings

Walgreens Boots Alliance (WBA) reported a quarterly loss of $3 billion despite beating adjusted profit and sales forecasts. Stocks rebounded more than 5% in pre-market trading.

Chinese Companies Fall as Beijing Reduces Stimulus

Stocks of U.S.-listed Alibaba (BABA), PDD (PDD), and NIO (NIO) declined in pre-market trading, attributed to cooling interest in Beijing’s economic stimulus efforts.

Trump Media & Technology Rebounds After Recent Gains

Stocks of Trump Media & Technology (DJT), parent company of Truth Social, rose in pre-market trading following an 18% gain on Monday. The rise is tied to the perception that Donald Trump holds a slight edge in the election, as well as a recovery from recent losses.

Energy Companies Retreat on Falling Oil Prices

Stocks of Occidental Petroleum (OXY) and Diamondback Energy (FANG) were down in pre-market trading due to lower oil prices. Hopes are rising that Israel’s planned attack on Iran will not impact nuclear or oil facilities.

102

United Arab Emirates Approves First Dirham-Linked Stablecoin

AED Stablecoin Company announced that it has received the first approval from the UAE Central Bank to issue a dirham-backed stablecoin.

The United Arab Emirates (UAE) will soon see its first regulated stablecoin.

AED Stablecoin LLC has announced that it has received approval in principle from the UAE Central Bank to issue and establish its own dirham-linked stablecoin digital currency.

In a statement issued on Monday, the company described itself as a pioneer for obtaining permission to become the first authorized entity in the region to launch a stablecoin backed by reserves of the local currency. The authorization issued by the central bank falls under its framework for regulating payment token services, according to the statement.

Dubbed AE Coin, the new currency promises to revolutionize financial services by offering unprecedented stability, security, and efficiency, the statement continues.

“As a stable, regulated currency, it provides secure and seamless payment solutions while fostering the growth of the UAE’s digital economy,” the statement reads. Pegged to a fiat currency, AE Coin will be backed by “transparent reserves” of the dirham and subject to “regular audits,” the company assures.

The token will offer fast and low-cost transactions, with potential use for various purposes, including business-to-business payments, individual transactions, and investments. The stablecoin aims to foster economic growth and innovation in the UAE by providing a secure and efficient digital currency, the issuer said.

AED Stablecoin added that its token will offer additional features, such as integration with the decentralized finance ecosystem (DeFi), allowing users to make loans and credit transactions on decentralized platforms.

In addition, the ambitious roadmap includes integration with decentralized applications (dApps), listings on exchanges, and ongoing technological advancements. The company also stated its plans to form strategic partnerships and forge alliances with merchants to increase real-world use cases, making the coin more accessible for everyday transactions.

AE Coin is intended to support the UAE’s booming digital economy, enabling simpler and more secure payments that contribute to the country’s financial innovation.

Interest in Stablecoins Grows in the UAE

The news comes at a time of global growth for stablecoins, a type of digital token built on blockchain technology that, unlike most cryptocurrencies, maintains a stable price, often with parity to a fiat currency such as the U.S. dollar.

Banks and other financial institutions in traditional finance have been actively exploring transactions with this class of tokens, as well as issuing their own stablecoins. Additionally, within the cryptocurrency industry, companies such as Ripple are working to advance this field.

Tether’s USDT dominates the stablecoin market, which is valued at more than $170 billion, with a current capitalization of $119 billion, according to CoinMarketCap data.

This development aligns with the UAE’s efforts to position itself as a global hub for cryptocurrency and Web3. Local regulators have been implementing regulatory policies that are more favorable to the new asset class. Dubai has introduced a sector-specific framework with a licensing system for digital currency exchanges.

Earlier this year, the UAE Central Bank’s board of directors approved a new system for overseeing and licensing stablecoins, raising concerns about potential restrictions on using cryptocurrencies other than authorized dirham-linked tokens as payment mechanisms.

A few days ago, UAE regulators removed VAT from cryptocurrency transactions.

Tether had already signaled its intention to launch a dirham-linked stablecoin when it announced a partnership in August with an Abu Dhabi-based company to advance these plans.