🎯Equity market is in LaLa land📊

Stocks generally fell on Tuesday as traders took a break and consolidated past gains. This is, even so, when we see weaker economic data from Europe with the hope that the Fed will be gentle on future rate hikes. 

In perspective, Germany’s CPI hits 10% yearly but is still lower than the 10.4% expectation. The same applies to Spain, which saw CPI rising 6.8%, far lower than the 7.4% expectation. 

Pika World will still be eyeing the job data on Friday, where it could be a market mover as the last straw lies on whether the hot labour market is starting to cool. A less robust labour market data coupled with the recent softening of CPI will be the right recipe for better equity performance. 

🧸The bond market is screaming recession🔫

As investors look into the US Treasury yield for insights on recession, the inverted yield curve is getting steeper and is hinting that recession is indeed on the way. Recall that yields on shorter-term bonds tend to be lower than on long-term bonds. As a result, investors will demand higher interest rates for long-term bonds to consider the risk of holding the debt over an extended period. 

🍄Historical perspective towards the bond market and economy🧮

On Tuesday, we saw the 2-year Treasury yield hovering around 4.46% compared to the 10-year, which was about 3.7%, a 0.76% gap. The gap was about 0.778% on Friday, the largest one since 1981. It was a time when the interest rate was in double digits as the Fed aggressively fought the stagflation seen in the 1970s, ushering the roar of a recession. 

Indeed, Pika World is seeing the yield curve solidifying the market’s consensus that the economy is now in trouble water and the Fed could ignite a time bomb. 

📮What’s on the menu today?🔭

There’s plenty on the plate today. 

At 9.15 pm, we will have the ADP Nonfarm employment data, which we expect to moderate from 239K to 200K. This will be one right direction for the market. 

Next, 9.30 pm brings us to the GDP figure, which is expected to remain firm at 2.7% based on the QoQ comparison for the 3rd quarter. 

The JOLTs Job Opening data is set to release at 11 pm. We are looking at a fall from 10.7M to 10.3M. 

Finally, the most crucial highlight will be Uncle Powell speaking at 2.30 am, which will stir the market once again as markets seek more clarity and insight into his perspective of recent economic data and hints on the interest rate hike trajectory.