FOMC meeting minutes published 

The U.S. Federal Reserve released the minutes of its September meeting on the 11th. To bring inflation back to the 2% target, maintaining a restrictive monetary policy is key. Most officials judged that it may be appropriate to raise interest rates again at future meetings. Some, however, believed that further interest rate hikes were not necessary. The minutes of the meeting also pointed out that the U.S. economy is expanding at a stable pace and the labor market is gradually reaching balance. However, inflation continues to be higher than the Federal Reserve’s target. Federal Reserve officials estimate that economic growth must fall below 1.8% to allow the trend of rising prices to be eased. 

Sep. PPI increased 0.5% MoM 

The U.S. Bureau of Labor Statistics also released inflation data. Producer prices in the US rose 0.5% month-over-month in September 2023, the least in three months, following a 0.7% rise in August, but above market forecasts of 0.3%. Goods prices were up 0.9%, prompted by a 5.4% surge in gasoline cost. 

(PPI MoM , U.S. Bureau of Labor Statistics) 

Sep. Core PPI increased 0.3% MoM 

Core producer prices in the United States were up by 0.3% over the previous month in September of 2023, following a 0.2% rise in the previous month and slightly above market expectations of a 0.2% increase. On a yearly basis, core consumer prices advanced by 2.7%, after an upwardly revised 2.5% rise in August and surpassing market estimates of a 2.3% increase, which might prompt the Federal Reserve to keep interest rates elevated for an extended period. 

( Core PPI MoM , US Bureau of Labor Statistics) 

Rising bond yields could reduce expectations for rate hikes 

FOMC has raised its benchmark interest rate 11 times to a target range of 5.25% to 5.5%, a 22-year high. Treasury yields have been rising sharply after the last meeting. If the situation persists, rising yields could eliminate the need for another rate hike. 

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided. 

World economy to grow 3% YoY 

The International Monetary Fund (IMF) expects the world economy to grow by 3% this year as stronger-than-expected growth in the United States offsets lower prospects for China and Europe and cut its 2024 growth forecast by 0.1 percentage point to 2.9%. 

Fast economic recovery in the US 

The International Monetary Fund says: “The strongest recovery among major economies is the United States, which is increasingly consistent with a ‘soft landing’ scenario.” The agency expects the overall economic growth of the 20 countries using the euro to be 0.7% for 2023 and 1.2% next year; while China’s economy will grow by 5% this year and 4.2% in 2024, and specifically points out: “The crisis in China’s real estate industry may deepen and have global spillover effects, especially for commodity exporters.” In contrast, the U.S. economic growth forecast is raised to 2.1% in 2023 and 1.5% in 2024. 

Global inflation forecast raises to 6.9% 

The International Monetary Fund raises its global inflation forecasts for this year and next year by 0.1 and 0.6 percentage points to 6.9% and 5.8% respectively. Commodity prices pose “serious risks” to the inflation outlook and could become more volatile due to climate and geopolitical shocks. “Expectations of higher inflation in the future are likely to influence current inflation rates, keeping them high,” the IMF notes. 

Real estate impacted by high interests  

The International Monetary Fund also addresses that the prospect of “higher in the longer term” interest rates has led to sharp falls in house prices in some countries. Vulnerabilities in the commercial real estate sector “pose significant risks to the financial sector” and urge policymakers to assess the impact that a sharp drop in real estate prices could have on financial institutions. 

(GDP YoY Growth 2023，IMF) 

(GDP YoY Growth，IMF ) 

Red: developing economies，Yellow: World，Green: Advanced economies 

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided. 

According to TrendForce report, car sales in 37 markets around the world totaled 5.55 million units in August 2023, an increase of nearly 1% from July. The growth momentum came from the launch of new models for the autumn. 

(August Ranking of Auto Brand Sales Share)

The composition of the top ten brands is the same as last month. The top three are Toyota, Volkswagen, and Honda. The Chinese car manufacturer BYD replaced Ford and became the fourth-largest brand in August car sales.

BYD’s Remarkable Growth

BYD has converted all its models to new energy vehicles, so the lukewarm domestic demand in the Chinese market has less impact on it. BYD recorded a MOM growth of 5%, and the market share was only 0.1% behind the third-placed Honda.

However, Japanese car manufacturers also have contributions from markets such as Southeast Asia. Consequently, for BYD to surpass Honda in the global market, the key is its expansion speed in overseas markets.

Ford’s Decline in August Sales

Ford’s ranking fell to sixth place due to lower sales in Europe and the United States compared with the previous month, with sales declining by 6.7% month-on-month.  

Challenges and Variables in 2H23

Although the launch of autumn models will help new car sales, there are still many variables in 2H23, including the United Auto Workers (UAW) strike that has not yet ended; OPEC+ allies’ crude oil production cuts, etc.

Strategies for the Fourth Quarter

As the fourth quarter approaches, auto manufacturers will do their best to ensure smooth production, fulfill orders, and stimulate year-end sales, minimizing the impact of reduced order visibility caused by economic changes. 

---

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided. 

Disappointing ADP Job Report’s Impact on USD | October 2023 Analysis

According to ADP® National Employment’s September 2023 Report, Private businesses in the US hired 89K workers in September 2023, the least since January 2021 when private employers shed jobs, and well below market forecasts of 153K. It follows a revised 180K increase in August, compared to an initial 177K.

Large establishments drove the slowdown, losing 83K jobs and wiping out gains they made in August. On the other hand, small companies added 95K jobs and mid-sized ones 72K. Meanwhile, annual wage growth slowed to 5.9%, the 12th consecutive monthly decline. Pay gains also shrank for job changers to 9%. 

(US Employment Changes, ADP)

The dollar index fell below the 107.0 mark on Wednesday, following the release of a disappointing ADP jobs report. Nevertheless, the dollar remained near its strongest level since November 2022, bolstered by hawkish comments from Fed officials that continue to reinforce expectations of elevated interest rates for an extended period. 

(U.S. Dollar Index DXY)

---

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided. 

Global Mobile Phone Production Decline in 2H23: Insights and Analysis

According to a TrendForce survey, after global smartphone production fell by nearly 20% year-on-year in the first quarter, production continued to decline by approximately 6.6% in the second quarter, to only 270 million units.

A total of 520 million smartphones were produced in the first half of 2023, a 13.3% decline compared to the same period last year. Both individual quarters and the first half of the year in total set a ten-year low. 

Factors Influencing Mobile Phone Production Decline

There are three reasons for the sluggish production performance:

Top Six Global Smartphone Brands Challenges and Channel Inventory

(2Q23 global smartphone production and market share ranking) 

Samsung’s production performance in the second quarter was not as good as the same period last year. The total production in the second quarter was 53.9 million units, a quarter-on-quarter decrease of 12.4%, but it still ranked first in production.  

Apple is facing the transition of new and old models. The second quarter is probably the lowest production performance among the four quarters, with output of 42 million units, a quarter-to-quarter decrease of 21.2%. It is worth noting that Samsung and Apple are quite close in their full-year production forecasts. If the iPhone 15 series performs better than market expectations, it may overtake Samsung to become the number one brand in the global market.

Xiaomi’s output in the second quarter was approximately 35 million units, a quarterly increase of 32.1%, driven by the gradual decline in channel inventory and the launch of new models.  

A special change in the ranking is that Transsion overtook Vivo and entered fifth place in the world for the first time. Its production volume increased by more than 70% quarter-on-quarter to 25.1 million units.  

Outlook for the Global Smartphone Market

The overall economy has not fully recovered in the second half of the year, and demand in consumer markets such as China, Europe and the United States has not yet recovered significantly. Even if the economic indicators of the Indian market improve, it is still difficult to reverse the decline in global smartphone production.  

---

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided. 

US Manufacturing PMI Shows Improvement, but Stagnant Inflation Remains a Concern

The ISM manufacturing purchasing managers’ index rose to 49 in September from 47.6 last month, well above market expectations of 47.8, reflecting the slowest contraction in the U.S. manufacturing industry in ten months.

Even as the economic slowdown improved, data still showed U.S. factory activity contracting on a month-on-month basis for nearly a year in a row, underscoring the impact of rising borrowing costs from the Federal Reserve on the industry.

Trends in New Orders and Production

Although new orders fell for the 13th consecutive month, the pace of decline slowed significantly as the changing supply chain environment pushed customers to take on more engineering (process).

Production rebounded from August’s stagnation and set the largest increase since July 2022. 

(ISM Manufacturing PMI, Institute for Supply Management) 

S&P Global US Manufacturing PMI

The S&P Global US Manufacturing PMI was revised higher to 49.8 in September 2023, surpassing the preliminary estimate of 48.9 and exceeding August’s final reading of 47.9.

The latest figure pointed to a fifth consecutive month of contraction in the sector’s health, albeit only fractional. Output increased at a marginal pace that was nonetheless the fastest since May.

In contrast, job creation remained moderate, and new orders continued to decline for the fifth consecutive month, reflecting the impact of high interest rates and inflation on consumer demand.

Inflation and Business Confidence

On the price front, both input costs and output charges accelerated, though inflation rates remained historically low, well below the levels seen over the past three years.

Moreover, business confidence reached its highest level since April 2022, driven by optimism about an impending improvement in demand conditions.  

Stagnant Inflation (Stagflation)

(US Manufacturing PMI, S&P Global) 

Based on the surveys, although survey data have improved overall, manufacturing reports show that production continues to slow down, and prices are accelerating again. The phenomenon presented is “stagnant inflation (Stagflation)“.

---

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided. 

The Rise of NVIDIA: A Dominant Force in IC Design

In the fast-paced world of integrated circuit (IC) design, the tides are constantly shifting, and the recent performance of the industry’s top players has been nothing short of remarkable.

According to TrendForce reports, fueled by an AI-driven inventory stocking frenzy across the supply chain, 2Q23 revenue for the top 10 global IC design powerhouses soared to US $38.1 billion, marking a 12.5% quarterly increase.

In this rising tide, NVIDIA seized the crown, officially dethroning Qualcomm as the world’s premier IC design house, while the remainder of the leaderboard remained stable.  

(2Q23 World’s top 10 IC design houses, TrendForce) 

NVIDIA: The New Kingpin

NVIDIA benefited from global CSPs (cloud service providers), internet company and enterprise generative AI, large-scale language model import application demands, and its data center revenue increased by as much as 105% quarterly.

In addition, revenue from gaming and professional visualization businesses also continued to grow, driven by new products.

Overall, revenue in the second quarter reached US$11.33 billion, a quarterly increase of 68.3%.   

Qualcomm’s Challenges

Qualcomm’s Q2 took a hit as the Android smartphone sector grappled with dwindling demand and Apple’s modem pre-purchases resulted in a subdued seasonal rhythm.

Consequently, their revenue slid by 9.7%, rounding off at about US$7.17 billion. 

Broadcom’s Mixed Bag

Broadcom benefited from the sales of high-end switches and routers catalyzed by generative AI, its NetCom business increased by about 9% quarterly.

However, offset by the decline in server storage, broadband, and wireless business, the second quarter revenue was roughly the same as the previous quarter at about $6.9 billion.  

AMD’s Steady Stance

AMD’s overall second-quarter revenue was roughly the same as the previous quarter at about US$5.36 billion, due to the decline in gaming GPU sales and embedded business in the second quarter.  

The Outlook for IC Design Houses

Although the inventory levels of semi-companies have improved significantly compared with those in 1H23, the outlook for the second half of the year tends to be conservative because of the weak market demand.

It is worth noting that the wave of generative AI and large-scale language model deployment has emerged among Internet companies and private enterprises.

It is expected that AI will be more helpful to related supply chain operations in the second half of the year, and the average sales unit price of such products will be higher than that of consumer products.

As a result, the world’s top ten IC design revenue will continue to have double-digit quarterly growth in the third quarter, and the output value is expected to reach a new high. 

---

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided. 

How Supply Chain Tensions Impact Crude Oil Prices in October 2023

The American Petroleum Institute’s weekly statistical report shows that U.S. crude oil inventories increased by 1.586 million barrels in the week ending September 22, 2023, after a decrease of 5.25 million barrels in the previous week.

WTI crude futures rebounded to $90.7 a barrel, hovering at their highest level since November. The prospect of tight supplies helped markets shake off worries about rising interest rates and their impact on the economy.

The $90 pivot point is psychologically important and reinforces the belief that the market is poised for further upside.

Additionally, crude oil tends to perform well in inflationary environments as investors seek refuge in tangible assets rather than currencies. 

(United States API Crude Oil Stock Change) 

(WTI crude Daily chart) 

---

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided. 

Airlines Issue Profit Warnings as Cost Pressure Rises 

Last week, American Airlines and Spirit Airlines joined other airlines in issuing profit warnings that rising costs would hit profits during the peak summer season, as airlines begin reporting third-quarter results in mid-October. 

Consequences for Airlines

American Airlines said it expects adjusted earnings per share in the third quarter to be between 20 cents and 30 cents, down from its previous forecast of 95 cents per share, citing higher fuel prices and new labor deals. The airline cut its operating profit margin in half from its forecast earlier this summer to 4% to 5%. 

Spirit Airlines expects negative profit margins of up to 15.5% in the three months ended September 30, down from its previous forecast of -5.5% to -7.5%. The airline also lowered its revenue forecast for the third quarter. 

Frontier Airlines said, “In recent weeks, sales have been trending below historical seasonality patterns” and forecasted an adjusted loss for the quarter. The airline’s shares hit a 52-week low. 

Outlook for the Industry

Airlines have lost the pricing power they gained last summer as lockdown eased and capacity constrained. Now they face a slow season when travel demand traditionally slows.

Fare tracking company Hopper said: “Fare prices are expected to continue to decline during the fall off-season, with domestic U.S. fares averaging $211 in September and October, down 30% from the summer peak.” 

(Global Airlines ETF ticker: JETS, US Global Investors) 

Conclusion

The airline industry finds itself at a critical juncture, navigating through a turbulent environment marked by rising costs, shrinking profit margins, and waning pricing power.

The third-quarter results will serve as a litmus test, shedding further light on the industry’s ability to adapt and prosper in the face of these formidable challenges.

As stakeholders watch closely, adaptability and resilience will be key to ensuring a successful flight through these trying times.

---

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided. 

The Bank of Japan’s Monetary Policy: Prioritizing Stability and Inflation Targets

The Bank of Japan (BoJ) maintained ultra-low interest rates on Sep. 22 and its pledge to keep supporting the economy until inflation sustainably hits its 2% target, suggesting it was in no rush to phase out its massive stimulus program. 

In terms of inflation data for August, Japan’s core CPI, excluding fresh food, came in at 3.1%, above the Bank of Japan’s target of 2% for the 17th month in a row. Another core-core CPI which excludes volatile fuel prices and fresh food, reached 4.3%. Higher import costs boosted the inflation.  

Yield Curve Control: A Pillar of Stability

The BOJ’s yield curve control program remains intact, with short-term interest rates at minus 0.1% and 10-year Japanese government bond yields guided around zero percent. 

Governor Kazuo Ueda’s recent hint at ending negative interest rates if prices and wages rise added another layer of complexity to the discussion. Ueda suggested that sufficient information and data would be available by year-end to facilitate a decision. 

(Japan CPI YoY% & 10Y JGB Yield) 

Conclusion

In summary, the Bank of Japan’s decision to maintain ultra-low interest rates, even in the face of rising inflation, exemplifies a resolute commitment to steering the nation’s economy on a stable course.

By prioritizing stability and economic growth, addressing the persistent inflation challenge, and fostering transparency in decision-making, the BoJ assures its continued role in Japan’s economic journey.

Governor Kazuo Ueda’s hint at potential changes in policy adds a layer of anticipation to the financial landscape.

As the situation evolves, market participants and analysts will remain vigilant, as this strategic decision’s impact unfolds.

---

Disclaimer  

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.