In this market commentary, the host provides a comprehensive weekly outlook covering several macro and market themes. He explains why former Chancellor Rishi Sunak is the clear front‑runner to become the next UK Prime Minister, noting his support from over 150 Conservative MPs versus Penny Mordaunt’s 25, the upcoming secret ballot, and the likely impact on sterling, which briefly rose but remains under bearish pressure due to structural UK challenges. The video then shifts to Asia, describing extreme yen volatility and a suspected second Japanese currency intervention that may have cost over $30 billion, as well as the Japanese finance minister’s readiness to act. Chinese markets are examined next, with the yuan and equities falling sharply after Xi Jinping’s power consolidation at the 20th Party Congress, raising concerns about tighter regulation, state ownership, and possible new taxes. The host outlines a packed US earnings calendar—165 S&P 500 companies, including major tech names—followed by a dense data‑release schedule: global flash PMIs, core PCE, US GDP, durable goods, jobless claims, and central‑bank decisions from the Fed, ECB and Bank of Canada. Market expectations remain heavily weighted toward a 75‑basis‑point Fed hike on 2 Nov, with similar moves anticipated from the ECB and BoC. He concludes with a brief note on the upcoming US midterms and points viewers to a linked ING research report for deeper analysis.
Chapters
Okay, very good morning to you. Hope you had a fantastic weekend, and lots for me to get you up to speed on, including why Rishi Sunak here looks odds-on favorite to become the new UK Prime Minister perhaps as soon as today. So we'll delve into that a little bit more. We've also got further suspected currency interventions in Japan, uh, with the Japanese yen seeing some extreme volatility overnight to accompany the moves that we saw at the end of last week. We've also had Chinese Chinese equities and the yuan hammered in the overnight APAC session, coming as President Xi looks to consolidate power at the 20th Annual Party Congress. Got 165 S&P 500 companies also reporting this week, including all of your mega-cap tech names like Apple, Microsoft, Amazon, and so on. We've also then got a whole ton of data coming out this week. We've got the preferred measure of inflation for the Fed, core PCE numbers coming, as well as lots of other figures. At the moment, the market's still leaning heavily that the Fed will pull the trigger on the 2nd of November by another 75 basis points. And you also are expecting interest rate hikes to come from the likes of the ECB and the Bank of Canada. So let's delve into this UK political situation, talk about what is exactly going on. So with Johnson having pulled out, now it's really a two-horse race, but there's one who is in far more advantageous position right now, and that is the former Chancellor Rishi Sunak, who's had more than 150 Conservative MPs come out and formally back him, comparative to Penny Mordaunt, who's lagging at around 25. However, there is some suggestion that she might have a late push to get her over the line. If she doesn't, then Rishi becomes the Prime Minister de facto. Now, a few things to be aware of if Penny Mordaunt can get above 100. What will happen here is there will be a debate in Parliament later on this afternoon. There'll be a secret ballot of Conservative MPs. They will then have their result at 6 PM, which will give an indicative show of support for which candidate they are backing. That purely is indicative. It then means then that two candidates, if they're still in the race at the end of today, will go to the Conservative membership who will vote then for their next party leader online, results of which we'll get on Friday. At the moment though, it's looking like none of that might even happen. Jeremy Hunt, who's the current UK Chancellor, has already come out, as well as lots of other senior and influential Conservative Party members, and have given their backing to Rishi Sunak. Chancellor Hunt himself has publicly done that in a Telegraph piece put out in the last 24 hours. How has sterling reacted? Well, in the recommencement of trade overnight, the pound initially popped up. However, that move has faded and we're pretty much trading of where we were when we finished trade on Friday night. I think one of the main things to take away here is that while Rishi coming in and teaming up with Hunt might be a powerful combination for more kind of fiscal prudency, which will alleviate some of those anxieties that caused that big shakeout post the Liz Truss, Kwarteng kind of mini-budget situation. The thing is here is that most of Wall Street is still of the understanding that the UK, as you can see here from Morgan Stanley analysts, they see as a structural underperformer. So the greater economic challenges still facing the UK at the moment still put a heavy bearish bias on the future direction of sterling for the time being. All right, some other things to be aware of here. You can see some Japanese currency volatility, what has seen or seemingly been the second intervention from the Japanese authorities in just two sessions. According to the FT, citing traders, they said that Japan likely spent more than $30 billion last week in order to support their local currency. Analysts said that that move, because the move that we had at the end of last week was particularly large in size, you can see here we moved from around 152 all the way down to around 146.5, and that's a huge move. But as I said, $30 billion perhaps being used as firepower to create that type of magnitude response. But could have been exacerbated a little bit because the move was precipitated by a report in the Wall Street Journal, um, and that said that the Fed were likely to debate next month on whether to approve smaller rate increases in December as global financial stress mounts because of the sharp rate hikes that they have been conducting. So weaker dollar helping further exacerbate that injection of Japanese currency strength in that move. Economists expect the central bank to keep its policy unchanged again at its 2-day meeting. We're going to have that at the end of the week in Japan. The finance minister Suzuki said in the overnight session to kick off this week that he will continue to monitor markets with a high sense of urgency and he would make necessary responses as needed. I mentioned China. So Chinese markets tumbled overnight as Xi's tightening grip has alarmed investors. So what's happened here is that the Chinese yuan weakened along with the nation's equities as they reacted to the possible risks that Xi Jinping's move to stack his leadership with essentially loyalists, which— what we can take away from that is that he's going to now secure a third term as head of the ruling Communist Party and consolidate his power. And that means then that things like further regulation, further state control into the ownership of companies that we've seen before through these various crackdowns, and more importantly, the stringency of the zero-COVID policy approach, all of these are likely to remain. There's even been speculation that this kind of, quote, common prosperity goal that he has may even lead to property and inheritance taxes as well. So across the board, It's been seen as a negative in the overnight session for the Chinese economy. Hong Kong's Hang Seng Index did drop about 6% in overnight trade. Technology companies were the worst affected. And you can see here the Hang Seng China Enterprises Index is now back to levels not seen since the 2008 global financial crisis levels. So things are pretty bad in China at the moment. We did see delayed Chinese data If you remember, because of that party congress happening, they delayed some key measurements. So GDP did come out overnight and in fact that did actually come in for Q3 firmer than expected at 3.9% above expectations of 3.3%. However, things like retail sales, some other data points were on the weaker side of things. I mentioned earnings, corporate earnings in the US. It's probably one of the most busiest weeks, 165 S&P companies coming out. Almost half of the Dow 30 components as well. So just running you through a couple of highlights really on Tuesday, you get the likes of Coca-Cola, 3M, GM, UPS. Aftermarket then the first of the big tech giants, Microsoft and Alphabet. Wednesday, Boeing premarket, Meta aftermarket. Thursday, you get the likes of Caterpillar, McDonald's, Merck premarket, but Apple, Amazon both coming out on Thursday. And then you get the oil majors in the form of Exxon and Chevron on Friday. Okay, taking a quick look at the calendar for this week, you get the global flash PMIs coming out for the eurozone and for the US later on this afternoon. So, so far, to just give you a bit of a, a flavor, the European manufacturing flash PMI was weaker, 46.6 below the expected 47.8, particularly weakness observed in the German figure. In terms of the services European level, that was in line with expectations at 48.2. German IFO comes out on Tuesday, always one quite closely watched by the market. But just given the situation with the energy crisis that's happening in Germany, given the direct impact of the dependency on Russia, that number likely to remain pretty depressed at this moment in time. And then Wednesday you get the first of the major bank decisions. You've got Bank of Canada under pressure to hike by 75 basis points this time around, given the upside surprise that we had in inflation most recently. And then on Thursday, you've got US GDP, you've also got durable goods alongside the weekly jobless claims, and then you get the ECB interest rate decision, where markets are pretty much baked in for a 75 basis point rate hike again from the ECB. Eyes are going to be open to some of the other ongoing issues, so excess liquidity, quantitative tightening and a terminal interest rate. Of course, much like we, we view in the US, where do rates now peak now that rates are rising is the key question. And then on Friday you've got the core PCE numbers, personal income spending coming out the US. You also get the likes of the flash GDP data in the eurozone. So particularly heavy week on the US side of things. But overall, in terms of the ability to move market expectations for the 2nd of November FOMC meeting is probably not going to change that outlook a great deal. At the moment, as you can see here, federal funds rate are pricing in around a 91% chance that the Fed will once again pull the trigger on another 75 basis point rate hike. And with just 2 weeks to go now until the US midterms, no one's really been talking about this a great deal because the emphasis has been so focused on so many other things that have been going on, as I've just been talking about. But the midterms are not that far away. And there was a really excellent research report from our friends at ING that they've put together. And I really like it because it's just really easy to read and it covers everything in a kind of matter-of-fact way, talks about what you need to know, but also market implications under different scenarios. So I have put that out on a LinkedIn post. I will share this link in the first comment of the videos. Of the comment section on this video. So feel free to have a read. I highly recommend it. But that is it. So again, feel free to like and subscribe to the channel. I wish you a fantastic week ahead and catch you next time. Thanks very much.
