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Fed Communication

• The Federal Reserve went into its blackout period with a bang Friday. The bank’s November 2nd policy decision is basically a forgone conclusion with a 75bps hike at a 93.7% probability, according to the CME’s FedWatch Tool. However, it is the communication regarding their December 14th policy decision in which they can use advantageously.
• As of Thursday, expectations for another 75bps hike in December were mounting with a 75.4% probability.
• Markets began exuding stresses Thursday night as the U.S. 10-year hit a new cycle high of 4.335%, and the Japanese Yen was falling precipitously to a fresh 32-year low.
• The Bank of Japan was forced to intervene once again, with September 22nd being the other. The bank purchased about $36.5 billion worth of Yen. However, given the lack of staying power the prior intervention had, the first since 1998, the BoJ needed a more coordinated effort.
• In comes the Fed Whisperer, the Wall Street Journal’s Nick Timiraos, whose 7:30 am CT article signaled a debate for the Fed’s December meeting, where they could step down to a 50bps hike.
• The news was aided by comments from San Francisco Fed President Daly, who said, “the Fed should avoid putting the economy in an unforced downturn … it's time to consider slowing the pace of rate hikes”.
• It is also speculated the maneuver is politically motivated ahead of the midterms.
• The U.S. 10-year slipped as much as 20bps and the 2-year as much as 22bps. The yield of the 30-year remained sticky, and the curve was able to steepen.
• The S&P gained 2.4% on the session and more than 3% from its overnight low.

 

Xi’s Supreme Power

• China concluded its weeklong National Communist Party Congress on Saturday, and President Xi tightened his grip with an unprecedented third term.
• Video surfaced on Xi’s goons removing those who could create friction or stand between him and absolute power, including his predecessor Hu Jintao.
• Given Xi’s new supreme power and prior pressures on big tech, markets did not take kindly to what is ultimately more uncertainties. KWEB, the Chinese internet ETF, is lower by 12% ahead of the bell, a new record low.
• The Hang Seng is -6.36% in its worst day since 2008 and -11.88% on the month.
• Commodities are under pressure as the Chinese Yuan loses another 1.39% against the USD today, marking -2.60% on the month.

 

Big Week of Earnings 

 

E-mini S&P (December) / NQ (December)

S&P, yesterday’s close: Settled at 3764.00, up 88.75 on Friday and 166.50 on the week

NQ, yesterday’s close: Settled at 11,358.50, up 267.75 on Friday and 614.50 on the week

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NQ (December)

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Crude Oil (November)

Yesterday’s close: Settled at 85.05, up 0.54 on Friday and 0.40 on the week

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Gold (December) / Silver (December)

Gold, yesterday’s close:  Settled at 1656.3, up 19.5 on Friday and 7.4 on the week

Silver, yesterday’s close:  Settled at 19.066, up 0.377 on Friday and 0.995 on the week

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Silver (December)

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