Early Morning Call: USD weakens ahead of Fed rate decision

Equity market overview

US equity markets lost ground as tech stocks remained under pressure yesterday.

Amazon and Alphabet saw their share price fall yesterday while the likes of Apple and Microsoft also recorded smaller losses.

Indices overview

In the Asia-Pacific region, indices traded mostly higher. Hong Kong’s Hang Seng rose another 2.5% after having gained over 5% in Monday’s session. Bank of Japan (BoJ) minutes showed overnight that if its policymaker decides to keep ultra-low interest rates and 10-year bond yields around 0%, members took note of growing inflationary pressure. One member even called for the need to eventually communicate an exit strategy from ultra-loose monetary policy.

European indices started today’s session higher, after recording gains in yesterday’s session.

The FTSE 100 was the best performer, posting gains of 1.29%.

Macro overview

Germany posted a better-than-expected trade surplus of €3.7 billion in September, as imports fell more than exports.

Today will be punctuated by two major events. At 12.15pm, the ADP survey is expected to reveal that 195,000 jobs have been created in the US private sector during the month of October.

Little reaction is to be expected as the market awaits the conclusion of the Federal Open Market Committee (FOMC) two-day meeting, and its decision on Fed fund rates to be unveiled at 6pm.

Economists anticipate another 75-basis point (bps) hike but also expect Fed chair, Jerome Powell to signal a decrease in the pace of rate increases in the coming months.

Corporate overview

On the corporate front, GSK beat analyst expectations and raised its full-year (FY) profit forecast.

Next reported full-price sales slightly ahead of its own expectations and maintained its earnings and sales forecast for the year.

Advanced Micro Devices (AMD) shares rose in extended trading hours despite having narrowly missed earnings expectations. The group posted earnings on 67 cents per share on revenue of $5.57Bbn. Earnings per share (EPS) was expected to reach 68 cents and revenue $5.62bn.

Earlier this month AMD posted a profit warning that sent its stock lower. Yesterday’s report showed that results from all four of the company’s business segments performed better that what AMD had anticipated.

Airbnb posted better than expected earnings and revenue in its third quarter (Q3). Earnings came in at $1.79 per share against analysts’ expectations of $1.44. The company posted revenue of $2.88bn, marginally higher the $2.84bn anticipated. Yet Airbnb shares fell in after-hours trading, as the group said that while cancellation rate were below 2020 and 2021 levels, they remained higher than that of 2019.

Today QUALCOMM and Robinhood Markets are scheduled to post their quarterly earnings.

Commodities

Oil prices rose after the publication of the latest API oil inventories. Crude oil stocks fell by 6.53 million barrels despite the release of 1.9 million barrels from the US strategic petroleum reserves.

Gasoline stocks fell by 2.64 million barrels, and distillates stocks increased by 865,000 barrels.