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The US government posted a $170 billion budget deficit, according to the Treasury Department, which reported $467 billion in total receipts and $638 billion in total outlays.
The fiscal deficit for the fiscal year 2023 was $1.696 trillion, a 23% increase from the previous year and the largest since the start of the pandemic. Outlays totaled $6.1 billion, down slightly from $6.2 billion the year before, while receipts declined from $4.9 trillion to a revised $4.4 billion.
Key Events
US retail sales constituted one key event for the previous trading week. The other key event was the speech by Fed Chair Jerome Powell, Thursday.
Jerome Powell’s Remarks
Jerome Powell, Chairman of the Federal Reserve Board of Governors, said Thursday that “raising the interest rate hinders the progress of the American economy,” acknowledging that there is clear progress in the performance of the economy and a decline in price inflation at a steady pace.
Powell added: “Quantitative tightening puts more downward pressure on economic activity and inflation,” stressing that the Federal Open Market Committee is “progressing cautiously” regarding monetary policy decisions in the recent period.
Retail Sales Data
Retail Sales in the United States surged 0.7% month-over-month in September to $704.9 billion, data published by the US Census Bureau showed on Tuesday.
This reading followed the 0.8% increase recorded (revised from 0.6%) in August and was better than market expectations of 0.3%. Retail sales, excluding automobiles, rose 0.6% in the same period, compared to analyst estimates of 0.2%.
The US dollar rose stronger against its competitors. The US Dollar Index (DXY) rebounded from 106.15 and rose to 106.40, approaching its daily highs.
Fed’s Beige Book
The US economy is likely to remain on a steady or slightly weaker path in the near future, according to the Federal Reserve’s Beige Book, a survey of business contacts. The report, released two weeks before the Fed’s policy-setting Open Market Committee (FOMC) policy meetings, found that labor-force tightness has decreased across the country.
Eurozone’s next crisis perhaps looming, in Italy
Italian 10-year bond spreads have reached an all-time high of 207 basis points, indicating a global bond-buying spree and a delay in contraction until 2026. Italy’s government, led by Giorgio Meloni, has relaxed fiscal policy, causing a global bond-buying spree. Borrowing costs have reached 5pc, the highest level since the eurozone debt crisis of 2012.
Italy is now exposed to an external shock, as real interest rates are skyrocketing worldwide due to declining inflation. The country’s debt-to-GDP ratio is 140pc, pushing the boundaries of acceptable borrowing.
Earnings Reports
Morgan Stanley Financial Group reported profits and revenues that exceeded market estimates. Earnings were $1.38 per share, compared to LSEG’s expectations of $1.28 per share. The giant financial group’s revenues also rose to $13.27 billion, compared to $13.23 billion.
The profits of Netflix Entertainment Services Company recorded an increase that exceeded market expectations in the third quarter of this year, according to the financial performance report issued by the company on Wednesday. The giant company’s shares rose by about 12% from the announcement of profit and revenue figures until the close of the trading session on the New York Stock Exchange.
The company’s revenues rose in the third quarter of 2023 to $8.54 billion, which is in line with expectations which indicated the same number.
The American electric vehicle manufacturing company Tesla recorded profits lower than market expectations, according to the financial performance report for the third quarter of this year issued on Wednesday after the closing bell of the trading session sounded on the New York Stock Exchange.
The giant company in the electric car sector recorded profits of 63 cents per share, compared to expectations of 73 cents per share.
UK Inflation
According to official data published by the Office for National Statistics (ONS) on Wednesday, the UK CPI rose 6.7% year-on-year in September, the same rate of rise seen in August. This data exceeded market expectations with an increase of 6.5%.
Core CPI growth (excluding volatile food and energy) extended to 6.1% year-on-year in the ninth month of the year compared to an increase of 6.2% in August.
Meanwhile, the UK CPI rose 0.5% month-on-month in September versus an expected 0.4% increase and a 0.3% increase in August.
The UK Retail Price Index (RPI) for September rose 0.5% month-on-month and 8.9% year-on-year, both readings in line with expectations.
What To Watch Next Week
In the US, focus will be on a range of key data including the third quarter gross domestic product (Q3 GDP) growth rate, the personal consumption expenditures price index (PCE Price Index), personal income and spending, followed by key indicators such as durable goods orders and PCE readings. Purchasing managers from S&P Global.
Meanwhile, there is expected to be intense activity on the earnings schedule with major players like Alphabet, Microsoft, Meta, Amazon, 3M, Coca-Cola, GM, and Spotify participating in the release of their reports.
While central banks’ interest rate decisions will be a major factor in market movements, with anticipation of the decisions of the European Central Bank (ECB), the Bank of Canada, and the Turkish Central Bank (TCMB).
Geopolitical Factor
Rising tensions in the Middle East continue to weigh on financial markets, particularly as regards oil and natural gas, as market participants continue to flock to safe haven assets, and notably the yellow metal that was given the golden chance to leap to flirt with the $2000 mark, but slightly below; at the high of $ 1996.57 per ounce on Friday. Gold is trading at $1981.45 at the time of writing.
The geopolitical factor is threatening that the conflict in the Middle East could spill over and global production continues to impact both supply and demand.
