Welcome to Markets 4x4, post delivered daily by 4pm in Sydney detailing the key macro themes from the Asian session.
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Amazon earnings releases pressure valve
Battered and bruised yesterday, seeing the MSCI Asia-Pac index slide to lows not seen since November 2022, Asian equities found rare respite to end the week, helped by positive analyst reactions to Amazon and Intel’s third quarter earnings reports. Chipmakers and tech names were the standout performers, mirroring the performance seen in US futures.
Middle Eastern skirmishes sends crude higher
Skirmishes between US and Iranian-aligned forces in Syria ensured crude oil continued its rollercoaster ride, sending WTI crude higher by more than 1%, largely reversing much of Thursday’s weakness. Using F-16 fighters, the US destroyed weapons and ammunition facilities, responding to attacks made on its facilities in Syria and Iraq. Markets are rightly concerned about a potential escalation in hostilities across the wider Middle Eastern region.
Market of the day: WTI crude oil
Despite continued hostilities, crude hasn’t looked convincing for a while now, struggling to push towards $90+ to test the highs struck in September. However, more recently, $83 has become an important level on the hourly chart, repelling attempts to push prices lower in the past few days. Those considering long positions could use dips below $83 for entry, with a stop just below $82 for protection. On the topside, keep an eye on downtrend resistance running from the high set late last week. It’s nothing major yet but worth watching regardless. On the topside, $84.50 and 85.25 are the first levels to watch. The double-top around $89.65 looms as a key test should the current bounce turn into a more pronounced move. As things stand, RSI and MACD suggest momentum is turning higher.
Australian inflation expectations rising sharply
Even with Australia’s Big Four banks forecasting a November rate hike from the RBA, markets are not yet convinced, continuing to put the odds of an increase in the cash rate to 4.35% at less than 50%. While futures traders are wavering, one noticeable development has been a sharp increase in market-based inflation expectations with 10-year breakevens – which measures the expected annual inflation rate over the next decade – lifting to nearly 20 basis points above the midpoint of the RBA’s 2-3% inflation target. Not de-anchored by any stretch, but one to keep an eye on.
Tokyo inflation turns up the heat on BOJ YCC
Underlying inflationary pressures in Tokyo accelerated unexpectedly in October, suggesting a similar outcome may be seen nationally when Japan’s next inflation report arrives in three weeks’ time. The Bank of Japan (BOJ) will no doubt be taking note as policymakers prepare for the October monetary policy meeting next week, an event where speculation is building surrounding a potential change to the bank’s yield curve control (YCC) program.
-- Written by David Scutt
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