Morning wrap (14.09.2023)

• Yesterday's session ended with modest gains on Wall Street, with stronger supply running in the second half. The Nasdaq gained 0.38%, the S&P 500 0.12% and the Dow Jones lost 0.2%;
• Fed interest rate swaps continue to indicate a low chance of a hike next week and about a 50% chance of another in November.
• Five of the top ten executives of major U.S. technology companies attended a closed-door Senate conference to discuss ways to control artificial intelligence;
• Measures of credit default swaps for both investment and speculative grade companies fell, indicating that betting on a September Fed pause still outweighs concerns about the US economy condtition
• The Asia-Pacific session was in mixed mood, with gains dominated by Japan's Topix and South Korea's KOSPI, both of which gained more than 1%. Australia's ASX also gained more than 0.5% but the Hangseng traded flat, and the Nikkei retreated nave to over 0.2%.
• Australia's labor market data came out quite strong, with unemployment remaining at 3.7% - unchanged and in line with forecasts but employment rose by 64.9k versus 25k forecasts and a drop of 14.6k previously. The participation rate was 67% vs. 66.7% previously and 66.7 exp.;
• Stocks in Japan received an additional boost after Minister Yoshitaka Shindo said the government would use all policies to manage the economy and stressed the need for decisive action to stimulate activity
• Demand for Japan's 20-year bonds at the auction was the highest since May 2020, easing concerns about a potential normalization of the BoJ's monetary policy and pointing to a longer-term continuation of the current detached monetary policy from other central banks
• Investors are awaiting today's decision by the European Central Bank and are still not convinced whether Christine Lagarde will decide to raise rates by 25 bps today or keep them unchanged, amid concerns about the health of European economies
• According to anonymous Reuters sources familiar with the matter the European Central Bank expects inflation among the 20 eurozone countries to remain above 3% next year, potentially making the case for a tenth consecutive rate hike at today's meeting
• Index futures point to a higher opening in Europe, with US index futures slightly higer after rollovers
• The dollar is weakening today against all G10 pairs accompanied by a drop in bond yields. EURUSD gains 0.2% in anticipation of the European Central Bank's interest rate decision
• Precious metals are trading mostly higher, with gold gaining 0.14% and silver down 0.16%. The dollar index retreats 0.16% today and continues its decline after failing to break above 105 points
• Energy commodities are gaining, with WTI and Brent crude oil rising more than 0.2%, natural gas contracts gaining almost 0.8%. Bank of America analysts indicated that oil prices can reach $100 before 2024 due to higher demand from heavy Chinese transportation sector activity and OPEC+ cuts;
• Cryptocurrencies are trading relatively flat, with Bitcoin still costing around $26,200. FTX received US court approval to liquidate crypto assets ($3,4 bln USD) but news came in without any panic.

A rate hike at the ECB could potentially open the EURUSD way up to 1.078 - levels from which it had dynamic declines at the beginning of the month. Source: xStation5