Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

The Xi Supremacy, Weak PMIs, Fed Hopes - What's Moving Markets

Published 10/24/2022, 06:38 AM
Updated 10/24/2022, 06:47 AM
© Reuters.

© Reuters.

By Geoffrey Smith 

Investing.com -- Xi Jinping spooks Chinese markets with a brutal consolidation of power, which distracted from a third-quarter growth figure that was well short of Beijing's target (albeit ahead of expectations). Business surveys in Europe point to an ever-sharper economic slowdown, but the pound strengthens as the risk of a potentially divisive comeback by Boris Johnson is removed. Stocks are set to open higher although Tesla is struggling after reports of a price cut in China, while oil prices react badly to the data out of China and Europe. Here's what you need to know in financial markets on Monday, 24th October.

1. Xi may be the one they can't forget

Chinese stock markets and offshore yuan sold off sharply after President Xi Jinping’s consolidation of power at the National People’s Congress sparked fears of a fresh campaign against the country’s biggest Internet companies and richest businessmen.

The Hang Seng Tech index had its worst day on record, falling over 8%, with individual stocks such as Tencent (HK:0700) and Alibaba (HK:9988) falling by even more. 

China also finally released the third-quarter gross domestic product data that had been due last week. The annual growth figure of 3.9% was better than consensus forecasts of 3.3% but clearly below the Communist Party’s own 5.5% target, a testament to the headwinds from the ongoing real estate crisis, Xi’s Covid-zero policy and, increasingly, the slowdown in its key export markets in North America and Europe.

2. PMIs point to Q4 contraction in Europe

The scale of that economic slowdown was on full display with the release of purchasing manager indices for the Eurozone and U.K., both of which put GDP on track for a contraction in the fourth quarter.

The Eurozone flash PMI fell to 47.1, its lowest since December 2020, while the comparable U.K. figure fell to 47.2, as the universal pressures of inflation and supply chain problems were compounded by an avoidable political crisis.

The economic outlook remains clouded most of all by the impact of sky-high energy prices. Warmer weather forecasts for Europe this week and near-full storage levels across the EU pushed natural gas prices to a four-month low on Monday but forward contracts for next year still predict a price level that will likely have a crippling effect on industrial profits.

3. Stocks set to rise at open on hopes for Fed pivot 

U.S. stock markets are set to open higher later, having decided on Friday that the Federal Reserve had chosen to flag the start of a policy pivot through The Wall Street Journal. The WSJ had reported that the Fed is set to discuss slowing the pace of rate hikes at its meeting in November, although it will likely carry out one more 75 basis point hike first.

By 6:20 ET (10:20 GMT), Dow Jones futures were up 102 points, or 0.3%, while S&P 500 futures were up 0.3% and Nasdaq 100 futures were up 0.1%. The three main cash indices had all risen over 2% on Friday on the back of the WSJ report.

Stocks in focus later will include Tesla (NASDAQ:TSLA), down 3.5% in premarket after reports of a price cut in China. Earnings are due after the bell from – among others – Cadence Design (NASDAQ:CDNS), Alexandria RE (NYSE:ARE) and Discover (NYSE:DFS). 

The monthly business survey from the Chicago Fed and a speech by Treasury Secretary Janet Yellen are the day's macro highlights.

4. U.K. markets buoyant as Johnson's withdrawal leaves Sunak in pole position

U.K. markets shrugged off the gloomy PMI news to post sharp rises, in response to the strong U.S. close and signs that Rishi Sunak will take over as Prime Minister from Liz Truss.

Former Prime Minister Boris Johnson, who had been reportedly plotting a comeback, withdrew from the race on Sunday after it became clear that many of the Tory Party lawmakers who had ousted him over ethics issues in the summer would not accept his return.

Sunak had raised taxes sharply when he was Chancellor of the Exchequer to cover Johnson’s more centrist spending plans. He is one of few remaining party figures with market credibility, having warned Truss during the summer leadership contest that her plans for unfunded tax cuts would be punished by the markets.

The pound rose, despite markets scaling back their expectations of Bank of England rate hikes in the context of a more prudent fiscal policy. Yields on 2-Year and 10-Year benchmark Gilts fell by 29 and 19 basis points, respectively, while the FTSE 250 rose 0.2%.

5. Oil slumps on weak Chinese, European data

Crude oil prices fell as the extent of the growth problems in China and Europe once again raised fears for the global demand outlook.

By 6:35 ET, U.S. crude futures were down 1.0% at $84.19 a barrel, while Brent futures were down 0.8% at $90.62 a barrel.

There was little sign of the geopolitical premium on oil rising from reports over the weekend that Russia’s Defense Ministry had tried – unsuccessfully - to convince western counterparts that Ukraine was about to deploy a “dirty bomb” and put the blame on Russia. The U.K.’s Ministry of Defense noted that Russia’s attempts to mislead the West before its invasion had left it with little credibility.

Ukraine’s government claimed that Moscow was trying to construct a pretext for its own use of tactical nuclear weapons to cover an increasingly urgent retreat from the southern city of Kherson.

Latest comments

Xi Supremacy means bye bye Taiwan. Fed Hopes it means Pump & Dump, because nothing stops the Fed to reach Target.
Proud of Chinese people & their hard work. Extremely hard working people. Look at the West with youngsters pursuing useless social degrees & finding new reasons to create another fringe movements. Its just a waiting game for able nations to see the West fall. No need to wage wars or something.
Chinese students make up the majority of international students at US universities. We must be awful.
feds and mid term want to give away free money, easy long here
don't short market gonna make min 2000 point move in 1-2 days mark it shorters trapped badly have to cover or they go curreupt. enjoy the show
dont undersatnd why people pay more for stocks based on a WSJ article
they dont its fixed
right now pump n dump scheme sponsored by fed and midterm elections moving markets
Fed hopes, yeah right haha. Thats code for pump and dunp guys
Thank you for sharing the article 💯
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.