Jason

The Federal Reserve is seeking to push investors into reevaluating their portfolios by injecting chaos into markets.

The current Fed Pivot is all about market expectations, and the two most weighty data this week has yet to come out. Market trends can only be judged when GDP and PCE are released. Besides, the current market trend is merely tentative. Until there is definitive data support and clear wording from the Fed, trading the Fed Pivot needs to be extra cautious.

This inflation report has little reason for optimism and has also led to a surge in market expectations for a 75-basis-point hike in November and December. For the Fed, a 75-basis-point hike in November is no big deal, but a 50-basis-point hike in December is highly possible if inflation develops unexpectedly.

Nothing in the September nonfarm payrolls should deter the Fed from continuing its aggressive monetary tightening path. While the number of new jobs created is the lowest since April last year, coupled with a fall in the unemployment rate, it should be considered a satisfying signal. However, it also reflects a fall in the participation rate, which is not a data that will please the Fed.

UK pension fund plans appear to be caught in a vicious circle of margin calls on interest rate derivatives, forcing them to sell off longer-dated UK government bonds. The BOE's move on Monday was aimed at helping banks ease the pressure on the LDI strategy used by many pension funds.

The IMF estimates that countries accounting for about one-third of the world economy will experience at least two consecutive quarters of contraction this or next year.

US data came in strong yesterday. The September ADP job report hit the bar (208k with a 53k upward revision for August).

The Fed will not simply act if the economy starts to collapse.

Major developed central banks delivered in September rate hikes at a pace and scale not seen in at least two decades, ramping up their fight against multi-decade high inflation with little let-up in sight.