The State of Markets: Regime Change?
This week our SELL-off indicator closed out its warning signal (on Thursday morning, having reached a reading of +33 on Wednesday). In other words, after 33 trading days of persistently strong ‘risk seeking’ behaviour, upward momentum in global markets has started to turn. The SELL-off indicator is shown below and is designed to measure phases of strong risk appetite in markets. When those phases end, the SELL-off indicator ‘closes out’ and returns to ZERO. Usually that marks a regime change in markets. That is, they switch from a ‘risk on’ environment, to ‘risk off’ one.
With equities stabilising yesterday, therefore, the key question is: Has a pullback started? Or, was Thursday’s weakness just a one day wobble? We outline our view on that in recent research, including in our Daily Risk Appetite publication, as well as in our Tactical Equity Asset Allocation research.
Next week’s US macro data and events will be key for thinking about those questions. Most notably, Wednesday’s Fed policy decision (& press conference) will be watched closely, as will other central bank policy decisions, which include the RBA (Tuesday) & BoE (Thursday). Key US macro data next week includes ISM Services (Tuesday), unit labour costs (Thursday) and Michigan sentiment (Friday). Please see below for a full list of key macro data, earnings, and events.
Key Chart: Longview SELL-off indicator vs. S&P500
Upcoming important data/events this week:
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Events: |
Fed policy decision (Thurs, 7pm); Bank of England policy decision (Thurs, 12pm); RBA policy decision (Tues, 3:30am). |
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Monday: |
N/A |
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Tuesday: |
Chinese Caixin service sector PMI (Oct, 1:45am); US ISM services (Oct, 3pm). |
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Wednesday: |
German factory orders (Sept, 7am). |
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Thursday: |
German industrial production (Sept, 7am); Eurozone retail sales (Sept, 10am); US nonfarm productivity & unit labour costs (Q3 first estimate, 1:30pm). |
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Friday: |
Japanese ESRI leading index (September first estimate, 5am); US Michigan sentiment (November first estimate, 3pm). |
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Key earnings: |
Berkshire Hathaway (Mon); Emerson, Marathon Petroleum, Ferrari (Tues); Qualcomm (Wed); Arista Networks, Duke Energy, Airbnb (Thurs); Constellation Software, Sony (Fri). |
Key Research
Longview on Friday, 1st November 2024:
“Equities, Bonds, & The US Election”
Momentum in global equity markets rolled over this week. In particular, with the S&P500 down 1.9% yesterday, it broke out of its sideways trading range and is back at its 50 day moving average. Other indices like the NASDAQ100, DJIA, and Russell 2000 (as well as the DAX/others in Europe) are also back at their 50 day (as of yesterday’s close). Global equities are just below that level (FIG 1), while higher beta indices are even lower (e.g. the Philly SOX, which broke below its 200 day yesterday).
Given that move lower in equities (and other key asset prices), our SELL-off indicator closed out its warning signal this week (yesterday morning having reached a reading of +33 on Wednesday).
In other words, after 33 trading days of persistently strong ‘risk seeking’ behaviour, upward momentum in global markets has started to fade/turn
Key North American macro data & events:
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Events: |
Fed policy decision (Thurs, 7pm); Bank of Canada publishes summary of deliberations (Wed, 6:30pm). |
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Monday: |
US durable goods orders (September final estimate, 3pm). |
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Tuesday: |
US trade balance (Sept, 1:30pm); Canadian S&P service sector PMI (Oct, 2:30pm); US ISM services (Oct, 3pm). |
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Wednesday: |
N/A |
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Thursday: |
US nonfarm productivity & unit labour costs (Q3 first estimate, 1:30pm); US weekly jobless claims (1:30pm); US wholesale inventories (September final estimate, 3pm); US consumer credit (Sept, 8pm). |
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Friday: |
Canadian employment data (Oct, 1:30pm); US Michigan sentiment (November first estimate, 3pm). |
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Key earnings: |
Berkshire Hathaway, Vertex Palantir, Zoetis lnc, Constellation Energy, Marriott Int, NXP Realty Income, Diamondback, Fidelity National Info, AlG (Mon); Emerson, Marathon Petroleum, Cummins (Tues); Qualcomm, Arm, Gilead, MercadoLibre, CVS Health corp, McKesson, Williams, Sempra Energy, American Electric Power Company Inc, Johnson Controls, Fair Isaac, Cencora lnc, Corteva (Wed); Arista Networks, Duke Energy, Airbnb, Motorola, Transdigm, Air Products, EOG Resources, Becton Dickinson, Fortinet, The Trade Desk, Monster Beverage, Kenvue, Datadog (Thurs); Constellation Software (Fri). |
Fig B: US Michigan sentiment (index)
Key European macro data & events
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Events: |
Speeches by the ECB’s Holzmann at SUERF conference (Mon, 1pm), Schnabel in Frankfurt (Thurs, 8:10am), Lane & Stournaras in Athens (Thurs, 7:35am – 3:45pm); Riksbank policy decision (Thurs, 8:30am); ISTAT publishes note on the Italian Economy (Fri, 10am). |
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Monday: |
HCOB manufacturing sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & Eurozone (9am) – all October final estimates apart from Spain & Italy; Eurozone Sentix investor confidence (Nov, 9:30am). |
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Tuesday: |
French industrial & manufacturing production (Sept, 7:45am); Spanish unemployment change (Oct, 8am). |
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Wednesday: |
German factory orders (Sept, 7am); HCOB service sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & Eurozone (9am) – all October final estimates apart from Spain & Italy; Eurozone PPI (Sept, 10am). |
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Thursday: |
German industrial production (Sept, 7am); German imports/exports & trade balance (Sept, 7am); French private sector payrolls (Q3 first estimate, 7:45am); Spanish industrial output (Sept, 8am); Eurozone retail sales (Sept, 10am). |
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Friday: |
French wages (Q3 first estimate, 7:45am); Italian industrial production (Sept, 9am); Italian retail sales (Sept, 11am). |
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Key earnings: |
Ferrari (Tues); Enel, UniCredit, Credit Agricole (Wed); Engie (Thurs). |
Fig C: German industrial production (Y-o-Y%)
Key UK macro data & events
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Events: |
Bank of England policy decision (Thurs, 12pm) followed by press conference (12:30pm); speech by the Bank of England’s Pill at the National Monetary Policy Committee Agency briefing (Fri, 12:15pm). |
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Monday: |
N/A |
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Tuesday: |
BRC retail sales (Oct, 12:01am); new car sales (Oct, 9am); S&P service sector PMI (October final estimate, 9:30am). |
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Wednesday: |
N/A |
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Thursday: |
Halifax house prices (Oct, 7am). |
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Friday: |
N/A |
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Key earnings: |
National Grid (Thurs). |
Fig D: UK BRC retail sales (3 months smoothed, Y-o-Y%)
Key Asia-Pacific macro data & events
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Events: |
RBNZ publishes financial stability report (Mon, 8pm); RBA policy decision (Tues, 3:30am); BOJ publishes minutes from September meeting (Tues, 11:50pm); speech by the RBA’s Jones at the FINSIA (Fri, 2:45am); market holiday in Japan on account of Culture Day (Mon). |
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Monday: |
Australian headline CPI (Oct, 12am); Australian ANZ-Indeed job advertisements (Oct, 12:30am); Australian Judo Bank service sector PMI (October final estimate, 10pm); Japanese money supply (Oct, 11:50pm). |
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Tuesday: |
Chinese Caixin service sector PMI (Oct, 1:45am). |
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Wednesday: |
Japanese Jibun Bank service sector PMI (October final estimate, 12:30am); Japanese cash earnings (Sept, 11:30pm). |
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Thursday: |
Australian imports/exports & trade balance (Sept, 12:30am); Japanese household spending (Sept, 11:30pm); China imports/exports & trade balance (Oct, 3am). |
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Friday: |
Japanese ESRI leading index (September first estimate, 5am). |
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Key earnings: |
Westpac Banking (Mon); Nintendo, Mitsubishi Heavy Industries (Tues); Itochu Corp, Honda Motor (Wed); Nippon Telegraph & Telephone corp, National Australia Bank (Thurs); Sony, SoftBank Corp, AN Holdings (Fri). |
Fig E: Japanese ESRI leading indicator (index)
Last week:
Longview on Friday, 1st November 2024:
“Equities, Bonds, & The US Election”
Global Macro Report, 31st October 2024:
“UK Losing Fiscal Discipline: Does it Change the Macro Theme?”
The SHORT VIEW (& market positioning), 29th October 2024:
“‘US Election Trades’ – Overcooked?”
Prior week:
Longview on Friday, 25th October 2024:
“Bond Yields Have Backed Up! What Next?”
Monthly Global Asset Allocation No. 52, 23rd October 2024:
“Return of the ‘PIIGS’ A.k.a. More on Europe’s (growing) ‘North-South’ Divide”
The SHORT VIEW (& market positioning), 22nd October 2024:
“EURUSD: Multi-year Uptrend Likely”