DAX rises as German retail sales rebound – Daily Market Brief, October 31, 2022

The DAX is set to extend last week’s gains after retail sales unexpectedly rose 0.9% MoM in September. The data comes after Q3 GDP defied forecasts and grew 0.3%, delaying a recession.

·         Apple rose 7.7% in its best one-day gain since 2020, as its safe haven status returned

·         China’s PMI unexpectedly contracted; USD/CNH rises 0.5%

·         Eurozone Q3 GDP & inflation data is due, EUR/USD falls towards 0.9950

Last week, the Dow Jones was the clear outperformer, jumping over 5.7% higher, lifted by cyclicals. Meanwhile, the Nasdaq managed to gain 2.7% last week despite disappointing big tech earnings. The market is becoming increasingly optimistic that the Federal Reserve will adopt a less hawkish stance after November’s rate increase.

Apple jumped 7%

Apple was a notable outperformer jumping 7.7% on Friday, its best one-day gain since 2020 after both quarterly earnings and revenue modestly beat forecasts. The figures helped to calm concerns over demand for its products, even as household incomes come under increasing pressure. Apple’s earnings stood out from the crowd after most big tech earnings disappointed. Meta and Alphabet experienced ad revenue growth weakness, and Amazon fell on weak guidance for the key holiday quarter. Apple’s results have helped cement the stock’s safe haven status, lifting demand and the share price.

China PMI

Asia stocks broadly rose overnight, helped higher by the strong close on Wall Street. However, China lagged after disappointing PMI data. Chinese manufacturing activity unexpectedly contracted again in October amid new COVID-related lockdown disruptions. The official PMI fell to 49.2 in October, down from 50.1 in September and missing the 50.00 forecast. The non-manufacturing PMI also contracted, falling to 48.7. The data marks a sluggish start to Q4 for the world’s second-largest economy and suggests that the Q3 rebound could be short-lived.

USD/CNH trades 0.5% higher at 7.3030. The offshore yuan hit a record low against the USD earlier in October.

German retail sales

Europe is pointing to a broadly upbeat start, thanks partly to stronger-than-expected German retail sales. Sales unexpectedly rose 0.9% MoM in September after falling -1.4% in August. Expectations had been for a -0.3% decline. The data comes after German Q3 GDP data on Friday showed that the economy held up better than expected, growing 0.3%, defying estimates of a -0.2% contraction, driven mainly by private consumption.

The DAX trades around a 6-week high of around 13300.

Eurozone GDP, inflation

Attention will now shift toward Eurozone GDP and inflation data. The first look at third quarter GDP is expected to show 0.2% growth QoQ, down from 0.8% but still defying calls of a contraction. Meanwhile, inflation in the region is expected to rise to a fresh record high of 10.2% YoY in October, up from 9.9%, and core inflation is also expected to keep rising to 4.9%, up from 48%, highlighting the struggle that the ECB continues facing to bring inflation back towards its 2% target.

While EUR/USD rose to a 6-week high of 1.0100 last week, the pair is back below parity at 0.9950 at the start of the new week.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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