Stocks surge across the globe, BoJ cuts its inflation forecasts

Summary:

• Stock markets move higher from the US to Asia

• Australian dollar drifts slightly lower on the back of weakish inflation for Q3

• Bank of Japan leaves monetary policy settings unchanged but it cuts CPI projections

Equity markets drove higher over the past several hours beginning with heavy increases in the United States and ending in Asia where the Japanese NIKKEI (JAP225) closed as much as 2.2% higher. Getting back to Wall Street it is worth mentioning two financial reports from Facebook and eBay. The former showed its earnings easily beat expectations producing $1.76 EPS compared to the median estimate of $1.46. However, a slight disappointment came from sales which totalled $13.73 billion against expectations pointing to $13.77 billion. On top of that, the company reported 2.27 billion monthly active users which is up 10% whereas a daily user count was 1.49 billion, up 9%. The price reaction was nervous to say the least as it moved down as much as 6% to bounce back to a 5% gain afterwards. In turn, eBay reported earnings of $0.56 per share coming in slightly above the consensus of $0.54 per share. The company’s revenue was in line with projections bringing the third quarter number at $2.65 billion. eBay provided investors with guidance as for the last quarter where it expects EPS between $0.67 to $0.69 pointing to upside risks to investors’ expectations of $0.67. eBay shared jumped over 5% in extending trading on Tuesday following the third quarter results. By and large, the yesterday’s session on Wall Street turned out to be really buoyant with the SP500 (US500) rising 1.6%, the NASDAQ (US100) adding also 1.6% and the Dow Jones (US30) climbing as much as 1.8%.

The Dow Jones drew a bullish engulfing on Tuesday boding potentially well for technicians. If the upward move continues one may count on an increase toward 25800 points in the upcoming days. Source: xStation5

Elsewhere, equity investors have alway some reasons to cheer today even as the global macroeconomic outlook seems to keep worsening. Beside the above-mentioned Japanese stock market let us notice that the Shanghai Composite is going up 1.2% while the Hang Seng (CHNComp) is rising 1% as of 6:28 am GMT. These gains have come despite disappointing Chinese PMIs producing declines in manufacturing and services. The former dropped to 50.2 from 50.8 (just modestly above the threshold dividing economic expansion from contraction) while the latter moved down to 53.9 from 54.9 - both results were worse than forecast.

Australian inflation decelerated in the three months through September suggesting no rate hikes there in the foreseeable future. Source: Macrobond, XTB Research

On the currency front one needs to pay attention to two particularly interesting events. First and foremost, the Bank of Japan decided to leave its monetary policy settings unchanged in line with expectations. However, it also did cut its inflation projections compared to those outlined in July. The BoJ sees core CPI at 0.9% in this fiscal year (down from 1.1% previously), and then it should gradually rise to 1.4% (1.5%) in the next fiscal year and to 1.5% (1.6%) in 2021. The bank also slashed its GDP forecast for this year to 1.4% from 1.5%. All in all, it looks that the Japanese central bank will not hike interest rates any time soon being burdened with additional risks stemming from trade frictions between China and the US. The second event was Australian inflation for the third quarter producing results slightly below expectations. Headline CPI dipped to 1.9% YoY from 2.1% YoY but it matched the median estimate. However, core gauged turned out weaker than expected - trimmed mean was 1.8% compared to 1.8% seen previously (revised down from 1.9%) while weighted mean was 1.7% also unchanged compared to the revised value from 1.9%. The details suggest that categories such as childcare, telecommunications equipment and services subtracted from quarterly growth while overseas holidays, domestic holidays and fruit added the most. The data suggests that the Australian central bank seems to be closer to rate cuts rather than rate increases.

The EURAUD broke down its important support on Tuesday and therefore odds for a continued move to the downside seem to have increased. The nearest target for bears could be localized in the neighborhood of 1.5850. Source: xStation5

In the other news:

• Japanese industrial production fell 2.9% YoY in September falling short of the median estimate of a 2.1% decrease; the trend does not deviate from those seen in Europe

• German retail sales dropped as much as 2.6% YoY in September compared to the consensus of a 0.9% increase

• US 10Y yield trade at 3.136% this morning while gold prices are 0.5% lower

• API reported that US oil inventories rose by 5.7 million barrels last week