Daily Market Commentary 10th November 2022

The bubble was burst overnight, with the Mid-Term Elections in the US throwing out an uncertain result. The previous gains on equity markets were returned, when the results of the US Mid-Term Elections, were still in the balance. The markets had been hoping for a red-wave, in the hope of a split Government, thereby restricting further fiscal spending. The GOP may have etched out a small victory in the House of Representatives, but it is still uncertain in the Senate. US equities tumbled and the US Dollar regained some of the lost ground. The EUR traded around parity, hovering around 1.000, while the GBP fell back to 1.1350.

Commodity currencies were also damaged by the rising reserve, with the AUD crashing back to 0.6430, while the NZD collapsed to below 0.5900. The Japanese Tankan report revealed manufacturing crashed to an 18 month low and the Bank of Japan’s monetary stimulus appears to be having little impact. Chinese inflation was lower than expected, with the CPI coming in at 2.1%, while PPI turned negative. The Chinese economy is still partially shut-down, due to COVID restrictions, so the re-opening is keenly awaited by markets. Australian Building permits fell 5.8%, for the last month, while annually falling 13%, hammered by rising input costs and demand.

All attention now turns to the US Inflation number, both CPI and Core inflation, with the headline expected to fall below 8%. This will drive equity, bond and currency markets.