Seasonality Could Favor Bitcoin in Coming Months — Market Talk
0948 ET - Bitcoin could receive a boost from seasonal factors in the coming months, LMAX Group strategist Joel Kruger says in note. "October has historically been the second-strongest month for the cryptocurrency, delivering an average return of 22% since 2013, he says. November is the best performing month with average gains of an extraordinary 46% over the same period. Bitcoin recently fell as September has consistently been its weakest month since 2013, he says. Bitcoin last trades up 1.3% at $112,338, LSEG data show. It reached a three-week low of $108,715 last week. ([email protected])0915 ET - AXA Investment Managers holds a positive view on most credit asset classes given solid corporate performances and a supportive macro environment. "The solid performance of corporates, who are managing to maintain high-profit margins, has supported the further tightening of credit spreads," it says. The macro environment is supportive for credit. The major potential risks to spreads would come from a more severe economic slowdown and a correction in equity markets, it says. Underlying fundamentals remain solid, as do technical factors, with current yield levels continuing to attract strong demand from investors, AXA IM says. Credit spreads versus government bonds and swaps moved lower in the third quarter. ([email protected])0903 ET - The European Central Bank is likely to be shifted from its comfortable policy position by weak economic growth, Capital Economics' Andrew Kenningham writes in a note. ECB President Christine Lagarde has said the bank is "in a good place," with inflation stabilising around the bank's target as interest rates kept at 2% for the last few months. But that view will likely change next year as growth in the eurozone lags global peers, notably in Germany, Europe's most important economy, Kenningham says. Inflation meanwhile is likely to undershoot target by more than the bank expects, he says. As such, the ECB will probably move to cut interest rates twice, each time by a quarter-point, over the course of next year, Kenningham says. ([email protected]; @joshualeokirby)0852 ET - Upward pressure on U.S. inflation comes not only "from tariffs and immigration restrictions but also from the ongoing dollar depreciation," Apollo's Torsten Slok writes. He says the greenback has depreciated almost 10% this year "and the Fed's model for the US economy finds that a 10% depreciation results in a 0.3% boost to inflation." The greenback declines today, following a weekly gain. It is down 0.5% against the yen and 0.3% versus the euro. ([email protected]; @ptrevisani)0843 ET - U.S. credit is expensive, with investment grade spreads at all-time tight levels and high-yield spreads close behind, Man Group says in a quarterly outlook. Spread compensation per turn of leverage appears increasingly inadequate given deteriorating fundamentals, it says. Signs of stress are also beginning to emerge in cyclical sectors and leveraged loans. ([email protected])0829 ET - Treasury yields and the dollar weaken as the looming U.S. government shutdown draws attention ahead of key labor data due later this week. September jobs figures start to pour in Wednesday, with the ADP report. Payrolls are due Friday, but analysts are bracing for a potential delay if the government shuts down. Economists surveyed by WSJ forecast the addition of 45,000 jobs, up from August's 22,000, with unemployment steady at 4.3%. Inflation remains sticky. The 10-year yield is at 4.148% and the two-year at 3.633%. The WSJ Dollar Index slips 0.2%. ([email protected]; @ptrevisani)0810 ET - Sterling remains higher against the dollar and the euro while U.K. government bond yields stay lower, showing little reaction after a speech from U.K. Treasury chief Rachel Reeves at the governing Labour Party's conference. Reeves vowed to fix the public finances but stopped short of mentioning spending cuts or tax hikes. She said Labour would "never do what the Conservatives did to ordinary working people" in reference to unfunded tax cuts under former Prime Minister Liz Truss. She warned of "further tests" in the months ahead, with choices made harder by "harsh global headwinds." Sterling last trades up 0.3% at $1.3436. The euro falls 0.1% to 0.8721 pounds. The 10-year gilt yield is down 3.1 basis points at 4.713%, Tradeweb data show. ([email protected])0758 ET - German Bund yields fall on Monday, mirroring trends in bonds globally, but their general direction is likely to be upwards, barring a major shock to the economy, Barclays strategists say in a note. "In the absence of a negative shock or notable deterioration in data, a drift higher in Bund yields could be the path of least resistance," they say. This is particularly the case given that Germany's net bond supply is set to accelerate sharply next year, they say. The 10-year Bund yield falls 2.2 basis points to 2.722%, according to Tradeweb. ([email protected])0718 ET - The eurozone economy is ticking along pretty well, assuaging fears of a serious blow from global trade turmoil, ING economist Bert Colijn writes in a note to clients. Economic sentiment improved in the currency area this month after the EU reached a trade deal with the U.S., surveys show Monday. This demonstrates "cautious optimism" about the road ahead, Colijn says. That doesn't herald a huge upturn in economic growth, but the 20 nations that make up the eurozone should at least keep the pace in the third quarter, he says. "With more clarity on the trade relationship with the U.S.--for now--and a decent domestic performance, the reality is that the economy is doing fine so far," Colijn says. ([email protected]; @joshualeokirby)0717 ET - The dollar could fall further if the U.S. nonfarm payrolls report on Friday shows continued weak employment growth in September, MUFG Bank's Lee Hardman says in note. Another poor payrolls print would support market expectations for the Federal Reserve to cut interest rates again in October, he says. "Our forecast for the dollar to weaken further heading into year-end are built on the assumption the Fed will deliver two further 25 basis-point cuts by the end of this year as the labor market remains weak." The DXY dollar index falls 0.2% to 97.957. ([email protected])0649 ET - Chinese exports of heavy trucks, upholstered furniture, kitchen cabinets and branded drugs could face limited direct impact from new U.S. sectoral tariffs of 25%-100%, Nomura analysts say. These goods account for less than 2% of China's U.S.-bound exports, they note. However, the analysts warn of potential indirect effects, as the tariffs may damp global demand for China's raw materials and components used in producing the affected goods. This is likely the case for Chinese furniture manufacturers that shifted production to Vietnam but still import significant inputs from China, they add. In pharmaceuticals, the direct impact is limited, as few Chinese companies have meaningful branded drug sales in the U.S. However, import demand for Chinese ingredients could soften in non-U.S. markets. ([email protected])0645 ET - The cost of insuring riskier high-yield euro-denominated credit against default edges lower as stock markets rise. Investors turn toward riskier assets ahead of U.S. jobs data this week, where weak numbers could increase prospects of more interest-rate cuts. HSBC analysts say markets were recently "perhaps a touch exuberant" but this is no longer the case. Credit mostly weakened last week but both euro-denominated and dollar-denominated high-yield credit slightly outperformed investment-grade credit, they say in a note. The iTraxx Europe Crossover index of euro junk bond credit default swaps falls 1 basis point to 264 bps, S&P Global Market Intelligence data show. The iTraxx Europe Main index of investment-grade CDS stays at 56 bps. ([email protected])