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1. List of overseas events during the National Day
A list of important overseas events during the National Day: 1) The U.S. government avoided a shutdown in October, and both parties passed a 45-day emergency funding bill; 2) US House of Representatives Secretary McCarthy became the first in US history to be removed from office.
1.1. October US government shutdown
The shutdown progressed as in previous years, with a compromise reached on the bill's deadline. On September 30, according to the Wall Street Journal, before the October 1 deadline, House Speaker McCarthy reached an agreement with Democrats to pass a 45-day emergency funding bill, delaying the next government shutdown until mid-November. Republicans won majority support for a fiscal bill that provides $16 billion in emergency disaster relief for the U.S.-Mexico border and cuts arms funding for Ukraine. The bill passed both the House and Senate, with all but the right wing of the Republican Party voting for it.
At the margin, the easing of the government shutdown boosted U.S. stocks in the short term, boosting investors' risk appetite. Marginally reduce the possibility that the government will not be able to release economic data, hedge funds to buy US Treasuries will sell again in the short term, and the price of US Treasuries will fall again. On the first trading day after the event, the 10-year Treasury yield rose 10 basis points, the 2-year Treasury yield rose 9 basis points, and the Dow Jones Average industrial Average rose 0.22%.
1.2. The ouster of House Secretary McCarthy is the first in history
In response to the Republican compromise, eight right-leaning Republicans joined with Democrats in the House of Representatives to remove McCarthy from office. On October 3, according to the Wall Street Journal, the right wing of the Republican Party felt that the compromise was too much and that the budget did not provide enough border control policies, and McCarthy did not take full advantage of the opportunity. On October 3, eight House Republicans joined 208 Democrats in a 216-210 vote to remove McCarthy from office. After the ouster, the House of Representatives would have one week to decide on a new House speaker, who would temporarily be replaced by McHenry, who was in McCarthy's faction.
The prospect of a more hawkish speaker who can meet the demands of the Republican right could affect the ability of both parties to reach compromise in the House. On October 5, according to the Wall Street Journal, the candidates for Speaker of the House of Representatives included Steve Scalise and Jim Jordan. Scalise served as the second-ranking Republican in the House of Representatives from 2014 to 2022 and has plenty of governing experience. At the same time, Scalise has a track record of winning approval from Republicans across the aisle, and if elected could help maintain Republican unity in the House. Candidate Jordan is a political ally of Trump who has promoted right-wing policies over the past three years.
2. Review of overseas major asset prices
During the Mid-Autumn Festival and National Day holiday, major overseas asset prices generally fell, crude oil prices fell ahead, only a few assets such as the US dollar rose. During the National Day holiday period (September 29 to October 5), New Zealand's NZ50 index was the best performer, up 1.17%, the Nasdaq gained 0.14% and the US dollar index gained 0.1%. On the other hand, the biggest declines in asset prices were in Brent crude oil (-11.86%), silver (-7.3%), LME copper (-4.2%) and Vietnam's Ho Chi Minh Index (-3.34%).
First, long-end US bond yields have risen rapidly and the yield curve inversion has declined. The market's focus on the Fed's monetary policy has shifted from the highest (" higher ") interest rates to the longer (" longer ") interest rates remain high. With the recent release of the US economy and inflation data show a certain resilience, such as the expansion of JOLT job vacancies, ISM manufacturing PMI index is stronger than expected, the market began to digest the Federal Reserve will maintain a longer period of high interest rates, long-end US bond yields rose rapidly, 10-year US bond yields rose to near 4.886%. The inversion of the 10-year and 2-year yield curves has declined and is now narrowed to around 30bp.
The upward pressure on the US dollar dampened the performance of international commodity prices. With the rise in US bond yields, combined with the weak economic performance of countries such as Europe and the UK compared with the US, the US dollar index rose, and currencies such as the euro, sterling and yen fell relative to the US dollar. During the period, the rise in the US dollar and US Treasury yields put pressure on international commodity prices, and the prices of gold, crude oil and London copper fell.
Among them, international oil prices fell the most, in addition to the upward pressure on the US dollar, there are inventory data recovery and market concerns about the global economic outlook. Brent crude oil prices fell 11.86 percent during the holiday period, the laggard among major assets. On the one hand, the long-end US Treasury yields and the US dollar index rose, the market is worried about the global economic outlook is suppressed, while the US EIA Cushing crude oil inventories rose on a weekly basis, so the crude oil demand outlook and inventories are better than expected to suppress the performance of oil prices. In addition, although OPEC+ oil producers continue to reduce crude oil production, its impact may have been digested by the market before, and the impact is relatively limited.
1) EIA crude oil storage at Cushing recorded its first increase in nearly eight weeks, which was better than expected. Crude oil inventories rose from a week ago, the market believes that interest rates may remain high for a longer time, and concerns about the global economy and crude oil demand prospects are strengthening, and international oil prices fell sharply during the National Day. U.S. Energy Information Administration (EIA) data showed crude oil inventories at the EIA Cushing rose 4.938 million barrels from a week ago, the first increase in nearly eight weeks.
2) The impact of OPEC+ oil producers continuing to reduce crude oil production may have been previously digested by the market, and the relative impact is limited. In the second quarter, a number of oil-producing countries expressed the uncertainty of the global economy, and in order to ensure long-term energy security, OPEC+ oil-producing countries announced a voluntary oil production reduction plan. On October 4, the Saudi Energy Ministry said that Saudi Arabia will continue to implement voluntary oil production cuts of 1 million barrels per day until the end of December 2023. On the same day, Russia's deputy prime minister said that Russia would continue to voluntarily cut its oil exports by 300,000 barrels per day until the end of December.
Equity markets around the world fell. The MSCI world equity index fell 1.39 percent over the holiday period. Among them, New Zealand's NZ50 index, China's Taiex Index and India's SENSEX index were the best performers, rising 1.17%, 0.61% and 0.14% respectively. However, equity indexes in most markets underperformed, with Vietnam's Ho Chi Minh Index down 3.34 percent, the Nikkei 225 index down 2.5 percent and South Korea's Kospi down 2.49 percent.
In the US and Europe, US indices performed relatively better than their European counterparts. The MSCI developed markets index fell 1.38 per cent. The US stock index only Nasdaq index rose 0.14%, while the S&P 500 and Dow Jones Industrial average fell 0.97% and 1.62%, respectively. In Europe, Germany's DAX30 index fell 1.65 percent, France's CAC40 index fell 1.66 percent, and Britain's FTSE 100 fell 1.98 percent.
In the Asia-Pacific equity market, the overall performance was weak, only the Indian stock index performed better. India's SENSEX was up 0.19%, the FTSE Singapore STI was down 1.62%, South Korea's Kospi was down 2.49% and the Nikkei 225 was down 2.50%. Vietnam's Ho Chi Minh Index was the worst performer, falling 3.34 per cent.
Hong Kong stocks and other Chinese assets have also been dragged down by external conditions. The Hang Seng Index fell 0.92 per cent and the Hang Seng Technology Index fell 0.54 per cent. Among them, such as energy, materials and other industries are dragged down by the decline in international commodity prices; Liquidity-sensitive industries such as medicine and Internet platforms are affected by the tightening of overseas liquidity, and their performance is lagging behind. In addition, real estate and banking stocks may be affected by the Evergrande incident, and the real estate index once fell by nearly 3%, but it has since recovered. The FTSE China A50 futures index fell 2.2 per cent, while the Nasdaq Gold Dragon index fell 1.28 per cent.
3. The US economic data are clearly differentiated, and the overall economy remains resilient
3.1. The manufacturing sector showed resilience, while the service sector showed signs of cooling
Us ISM manufacturing PMI in September exceeded market expectations, rising from the previous value. Us September ISM manufacturing PMI recorded 49.0, better than market expectations, up from the previous value of 47.6; The manufacturing index remained in contraction territory for the 11th consecutive month, but showed some resilience. Employment, output and new orders improved the most, rising 2.7, 2.5 and 2.4 percentage points, respectively. Among them, the employment and output index returned to the expansion range, reflecting that the manufacturing employment and production boom is still resilient, and the manufacturing demand is slowly declining.
ISM services index showed signs of cooling, inventory sentiment and new orders index expansion slowed. The US services PMI came in at 53.6 in September, down 0.9 percentage points from the previous reading but still in expansion territory. Separately, the service sector showed signs of cooling. The inventory sentiment index fell the most, from 61.5 to 54.8 in September, down 6.7 points from the previous month. The inventory indicator fell 3.5 percentage points month-on-month, down 54.2. Indicates that inventory growth has slowed and there are signs of cooling. The new orders index fell 5.7 points from August to 51.8, the lowest so far this year and a sign that demand in the services sector may be starting to weaken.
3.2. The labor market remained tight overall, but slowed in September
September ADP employment came in below market expectations, with services contributing the bulk. The September ADP employment report showed the U.S. private sector added just 89,000 jobs, missing market expectations of 150,000. August's reading was revised up to 180,000 from 177,000. Manufacturing employment increased by only 8,000, while the services sector was the main contributor to total employment, adding 81,000 jobs. Most of the new service sector jobs came from leisure and hospitality, which added 92,000. Employment in professional and business services fell by 32,000. In terms of wage growth, the ADP data showed median wage growth was 5.9 percent year over year in September, down from August.
JOLT job openings in August showed a widening of the employment gap, and the labor market overall remained tight that month. The number of job openings in the U.S. JOLT increased to 9.61 million in August, beating market expectations of 8.815 million and the previous estimate of 8.827 million. The larger-than-expected increase in the number of JOLT job openings reflected a slight warming in the labor market. Combined with the total number of unemployed people, although the number of unemployed people in the United States also rose in August, to 6.355 million people, an increase of 514,000 people from the July value; The labor market gap was 3.255 million, compared with 3.079 million in July, reflecting that the labor market remains tight.
4. Latest developments in overseas science and technology
4.1. The AI application that landed at the end of September attracted the attention of a wider range of enterprise customers
In the past two weeks, the largest technology companies in the United States, Microsoft, Google, Amazon, and Apple have all begun to roll out their latest AI applications. According to Microsoft's Copilot press conference news, it announced the launch of the free Copilot application embedded in Windows11 on September 23, and announced that Copilot Office features will be launched in early November 2023. Google has introduced Bard, similar to Microsoft Copilot, which allows users to use natural language to operate Gmail, Docs, Drive, Maps, and Youtube functions. Amazon has enhanced the data-processing capabilities of its Alexa assistant, making it more creative and adaptable.
With the popularity of generative AI applications, companies are starting to focus on how to extend AI top-down into their office environments. According to a recent study published by Stanford and MIT, the use of generative AI in the field of customer service increased a company's efficiency by 14%. In addition, according to The Conference Board's employee survey, 56% of white-collar workers are already using generative AI at work, with 26% of respondents indicating that their employers have rules for the use of AI at work, and an additional 23% indicating that their employers are drafting rules for the use of AI.
Controlling the operational risks brought about by generative AI has become an important concern for enterprises. The business risks associated with generative AI include factors ranging from cybersecurity, copyright infringement, inaccurate information, and data breaches. Some companies are updating their rules and regulations to embrace the productivity brought by AI while also controlling the risks of employee use. The artificial intelligence insurance field has also ushered in the corresponding attention, Amira Insurance Company, Swiss Re company and Munich Re company launched the corresponding AI commercial insurance plan.
4.2. Generative AI regulation is dynamic
Google's antitrust case continues, which will determine the definition of anti-competitive behavior by generative AI companies in the AI App application market. On October 3, according to the Wall Street Journal, Microsoft CEO Nadella appeared in Google's antitrust court and accused Google of using anti-competitive practices. Nadella endorsed the Justice Department's conclusion that Google cemented its dominance of Internet search by striking a deal with Apple to make Google's search engine the default setting on Apple's Safari web browser. If Google's dominance in search can't be overturned, Microsoft won't be able to get enough high-quality data to train its AI search app Bing.
The French anti-competition authority is concerned about the influence of American champions on local small and medium-sized enterprises. According to Reuters news agency, the French anti-competition authority searched Nvidia's French headquarters on Sept. 28, looking for evidence of anti-competitive behavior. The French competition authority's report, published in June, noted that "the increasing use of artificial intelligence will drive the growth of demand for cloud services" and said the competition regulator must "ensure that leading players do not hinder the development of small or new enterprises based on new cloud technologies." Regulatory decisions will determine the competitive landscape of AI in the future and the extent to which it affects the way society has traditionally operated.
