Stocks set for heavy weekly losses; TRY pulls back despite Pastor release

Summary:

• What’s next for stocks after large recent declines?

• US banks kick-off earnings season

• Turkish Lira volatile after pastor Brunson released

• Uni Mich misses; Gold remains in breakout territory

• PBOC look for crypto experts; Ripple rallies

Barring a dramatic recovery this evening, stock markets are set to post a heavy week of losses with the selling broad based, and perhaps more worryingly, not the result of an immediately apparent catalyst. This is of greater concern because it suggests that a snapback recovery is unlikely and that the declines are something more than a spate of panic selling in a knee jerk reaction - which is what we saw in the sell-off back in February. What’s next for stocks? Click here for an analysis in 10 charts.

The 3rd quarter earnings season has begun in earnest today with 3 of the big banks all posting their latest trading results. Summarising the results, both JP Morgan and Citigroup delivered better than expected earnings numbers but the revenue was lower than forecast in both cases. It was the opposite for Well Fargo, who beat on the top line but missed on the bottom. JPMorgan attributed the beat on earnings to higher interest rates and a growth in loans which helped the bank offset weakness in bond trading revenue.

A long awaited decision on a future of the US pastor Andrew Brunson has just been taken by the Turkish court. Following 2 years of detention the pastor has been freed and will be able to return to the US. This story has become critical for the FX market as deteriorating relations between US and Turkey led to the FX crisis on lira and a decision on pastor has been seen as the first step towards a normalization. The reaction on USDTRY is mixed as the pair hovers around 5.90. However the lira has been gaining in recent days and crucially the key 6.00 barrier has been broken.

The final data of note out this week comes from the US with the University of Michigan consumer sentiment disappointing a little, and coming in below forecast. The index for October came in at 99.0 compared to consensus forecasts of a 100.4 print, while the prior reading was also subject to a downwards revision and now stands at 100.1 from 100.8 previously. Looking back today’s number is still pretty high historically speaking, but it does represent the third time in the last 4 releases that it has come in below forecasts. Yesterday’s lower than expected US CPI release caused a sharp move higher in the precious metals complex with Gold, Platinum and Silver all posting solid daily gains. Gold in particular could be worth keeping an eye on as the market rose to a 2-month high and in doing so made a potentially key break higher. The size of the D1 candle will draw attention to the eye and the strong impulse saw price take out 2 prior resistance levels around 1208 and 1215.50.

In the crypto space there’s been some large gains seen today in Ripple with the market rising around 10% and recouping a fair chunk of Thursday’s losses. According to a document published on 10 October the People’s Bank of China (PBOC) is currently looking for two engineers with experience in blockchain and cryptography with an aim that the two would develop big data platform and chip processor that would enable cryptocurrency transactions. Apart from engineers PBOC is also looking for law and finance experts that would research risk management and economic mechanisms on legal digital currency. Such a move may be closely linked to CN finance report recently released. The report claimed that recently introduced USD-backed “stablecoins” may negative influence fiat currencies and pose a threat for yuan. The report authors advised Chinese authorities to evaluated possible implementation of the yuan-backed stable coin. CN Finance is affiliated with the People’s Bank of China.