ASX 200 to rise, S&P 500 breaks 4-week losing streak + Iron ore outlook

ASX 200 futures are trading 58 points higher, up 0.83% as of 8:20 am AEST.

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S&P 500 SESSION CHART

MARKETS

• Major US benchmarks rallied on Friday to close near best levels
• S&P 500 finished the week 0.46% higher, breaking a four-week losing streak
• US 10-year yield bounces 9 bps to top recent highs and mark the highest close since August 2 007
• WTI crude down 8.8% last week, the biggest fall since March
• Bullish focus points for the week: Strong labour market, disinflation momentum with September US CPI consensus expecting another fall in core prices, equity bounce potential from oversold conditions, oil prices pull back sharply and continued M&A with a potential US$60bn bid from ExxonMobil
• Bearish focus points for the week: Unrelenting bond yield momentum as the 30-year pushes above 5.0% for the first time since 2007, higher-for-longer Fed, magnitude of bond yield rally triggers more talk about something breaking, good news is bad news theme, no signs of capitulation and potential government shutdown next month
• Thursday marked 12th straight day in which the S&P 500 closed at least one standard deviation below its 50-day moving average, the longest streak since October 2022, according to Bespoke Investment Group
• Bond traders are betting historic sums on November Fed hike (Bloomberg)
• Treasury ETF volumes surge, long-bond funds seeing inflows (Bloomberg)

STOCKS

• Exxon Mobil in talks to buy Pioneer Natural Resources for US$60bn (Reuters)
• Tesla cuts Model 3 and Model Y prices in US (CNBC)
• OpenAI exploring making its own chips (Reuters)
• TSMC revenues fall less than feared as AI demand offsets slump (Bloomberg)
• Levi Strauss cuts FY forecasts for second time in Q3 (Reuters)
• Philips shares fall 7% after FDA says sleep device recall inadequate (CNBC)
• US companies borrowed more than US$500bn in net terms since Fed started hiking show little inclination to pay back debt (Bloomberg)

CENTRAL BANKS

• Fed officials show little concern that the recent rise in US Treasury yields could imperil a "soft landing" for the economy (Reuters)
• ECB's Schnabel can't rule out more hikes amid inflation risk (Reuters)
• India Central Bank keeps rates unchanged, strikes hawkish tone (Bloomberg)
• RBA says share of borrowers in early financial stress is growing (Bloomberg)

ECONOMY

• US nonfarm payrolls doubles estimates, unemployment rises to 3.8% (Bloomberg)
• IMF sees higher odds for soft landing amid uneven global growth (FT)
• Germany industrial orders rebound in August but outlook uncertain (Reuters)
• Japan's inflation adjusted wages fall for 17th month in August (Reuters)
  
  

Sectors to Watch: Oversold Bounces

Plenty of overnight ETFs bounced 2-3% from extreme oversold levels.

And maybe that's all there is to it. Markets are trying to set in a low but we need more evidence that this is more than just an oversold bounce.

There's plenty of evidence pointing to attractive short-to-medium term returns from such oversold levels. Less than 10% of S&P 500 stocks were above their 50-day moving average last week. According to Carson Group, this is a rare signal that marked several market bottoms and the S&P 500 would rally 15.5% a year later, up 80% of the time.

The only time this signal failed was during 2002, 2007 and 2008.

US Jobs Data: More Than Meets the Eye

The US added 336,000 jobs in September, which was:

• Up from the 119,000 jobs added in July and August
• Almost double the 170,000 forecasted by economists
• Approximately 100,000 jobs need to be added per month to keep up with growth in the working-age population

While it was a sizeable beat, the number of people working full-time jobs has been easing and down almost 700,000 from June peaks.

At the same time, part-time job holders have jumped by almost 1.2 million since June.

Are people taking on multiple jobs to fight inflation and the cost of living crisis?

The ABS noted a similar trend in September, where the number of multiple job holders rose to 6.7% In the June quarter 2023. Historically, this number has sat between 5-6%.

Iron Ore Outlook

A few interesting takeaways from China's steel and commodities consultancy Mysteel:

• "The total volume of iron ore shipped from the 19 ports and 16 mining companies in Australia and Brazil under Mysteel's regular survey to global destinations increased by a large 4.8 million tonnes or 19.5% on week to touch a three-month high of 29.4 million tonnes over September 25-October 1."
• "Most participants in China's iron ore market believe that after enjoying a modest boost from steelmakers' post-holiday restocking, ore prices will fluctuate or even soften in the near term."
• The unlikely rise post-holidays reflects a) the high price of iron ore making steel mills more cautious about buying and b) the deepening losses that more mills are bearing

Singapore iron ore futures closed at US$115 a tonne last Friday.