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The Long and Short of it, week ending 07 October 2022

The Long and Short of it, week ending 07 October 2022

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Publication Type: Market Commentaries

Stock prices moved sharply higher Monday and Tuesday, with all 3 major stock market indexes rebounding off Friday’s closing levels, their lowest of the year. Investor sentiment turned positive early last week, with a weakerthan-expected ISM Manufacturing Index number and falling job openings boosting expectations of a weakening economy and, as a result, a less aggressive Fed. Those expectations faded Wednesday and Thursday following a stronger-than-expected ADP employment report, better-than-expected ISM Services Index release, hawkish comments by Fed officials and an OPEC+ decision to cut oil production by 2 million barrels per day. Friday’s job report, better than expected in many regards, sent stock indexes spiralling lower with rising expectations the Fed would continue its vigilance against inflation and tighten 75bps at the next FOMC meeting in November. Nonetheless, for the week, all 3 major indexes managed to finish higher. The 10-year Treasury rate had an upand-down week as well, falling almost 20bps to 3.64% through Tuesday only to climb higher the remainder of the week to finish at 3.89%. Similary, the U.S. dollar weakened almost 2% through Tuesday but closed the week up over ½ percent (as measured by the DXY Index). At week’s end, the S&P 500 Index rose 1.5% to close at 3,639.66, the Nasdaq Composite Index increased 0.8% to 10,662.47, the Dow Jones Industrial Average gaine 2.0% to close at 29,29.25, the 10-year U.S. Treasury rate rose 7bps to 3.89% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 0.6%.

European stock markets moved similarly to U.S. markets, rising Monday and Tuesday and faltering the remainder of the week though the magnitude of the move lower Friday was much less than the U.S. move lower. Rising on “bad news is good news” in the hopes the U.S. Federal Reserve Bank will act less aggressively as a result, the STOXX 600 and FTSE 100 Indexes rose 2.7% and 3.9% through Tuesday. UK Prime Minister Truss’ decision to cancel plans to lower the top tax rate also helped move stock prices and the British pound higher. Markets moved lower the remainder of the week on the back of weaker-than-expected PMI service releases in the UK and euro zone and on OPEC+’s decision to cut oil output by 2 million barrels per day. The announcement by OPEC+ caused oil prices to surge last week adding to fears of continued elevated inflation levels. Friday’s strong U.S. employment report also pushed European stock prices lower with increased expectations the U.S. Federal Reserve Bank would continue its aggressive monetary tightening and raise rates 75bp in the November FOMC meeting. The UK 10-year government rate, down 24bps through Tuesday, finished the week up 14bps while the British pound, up almost 3% through Tuesday, closed the week down over ½ percent.. At week’s end, the FTSE 100 Index rose 1.4% to 6,991.09 the STOXX 600 Index increased 1.0% to 391.68, the 10-year UK government rate rose 14bps to 4.23%, the 10-year Bund rate rose 9bps to 2.20% and the British pound and euro both weakened 0.6% versus U.S. dollar.

Top performing ETPs over the week

. 3x Long ETPs 3x Short ETPs
UK +3x BP (3LBP) +26.2 % -3x Diageo (3SDO) +4.5%
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The Long and Short of it, week ending 10 October 2022

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