NAGA Weekly Recap October 2 – October 6 — 2023

In this week's financial digest, turbulence was the watchword. The Dow Jones saw a stark dip, reinforcing concerns across global markets. Rising borrowing costs are playing havoc with corporate decisions, casting shadows over sectors and reshaping the M&A landscape, as seen with Exxon's potential acquisition move. Alongside these developments, currency markets, particularly pairs like EUR/USD, are at the forefront of traders' focus.

Step inside for an in-depth exploration of these pivotal market events and more ⬇️

Dow Jones slammed more than 500 points

The Dow Jones Industrial Average ($DOW30) experienced a sharp decline, shedding over 500 points and concluding at 33,002, marking a 0.4% decrease for the year.

The escalating borrowing costs significantly influenced this drop in US financial markets.

Other indexes also faced headwinds. The Dow Jones utility average, despite a 0.8% rebound to 789.40, has been under pressure, having declined as much as 14% in recent weeks.

The continuous uptick in borrowing rates is affecting corporate decisions. Higher interest rates mean increased expenses for corporations planning stock buybacks or dividend enhancements. Mergers and acquisitions also become more costly under such conditions. With fixed-income instruments now offering more attractive returns, equities are seeing reduced interest.

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ExxonMobil ($XOM) near $60 billion deal

Exxon Mobil is reportedly on the brink of finalizing a purchase of Pioneer Natural Resources ($PXD) for an estimated $60 billion. This acquisition, set to be concluded within days barring any last-minute negotiation hitches, would significantly boost Exxon Mobil's foothold in the oil-abundant Permian Basin.

It's not the first time Exxon has shown interest in Pioneer. The Wall Street Journal highlighted early-stage discussions between the two back in April, a report that saw PXD stock surge by 4.5% on April 10.

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WTI oil ends at lowest since Aug. 30, 2023

US crude futures dropped 2.3%, settling at a five-week low of $82.31 a barrel, marking a 7.8% decline over the last two trading sessions — among the steepest two-day descents this year. Brent crude mirrored the trend, closing roughly at $84. Edward Moya of Oanda comments on the shift, noting, "This sharp turnaround in the oil market is likely vexing for the Saudis." He points out that Brent crude's price plummeted over $10 since last month's end, primarily due to skyrocketing global bond yields which have impacted the worldwide growth perspective. While pinpointing a definite support price is challenging, Moya suggests, "Should China's economic forecast brighten, a rebound to the $90 mark is plausible”.

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The $EURUSD plummeted to 1.0487, its lowest since early March

The EUR/USD plummeted to 1.0487 on Wednesday, its lowest since early March, as investors continued to seek refuge in the US Dollar. Financial markets were in risk-averse mode following central banks’ monetary policy decisions from earlier this month, as despite holding fire, most policymakers reaffirmed the inflation risks remain high and rates should stay higher for longer to maintain price pressures under control.

From a technical point of view, the weekly chart suggests additional declines are likely, as $EURUSD remains below bearish moving averages, with the 100 Simple Moving Average (SMA) providing dynamic resistance at around 1.0720. Technical indicators, in the meantime, keep heading south below their midlines, with the Relative Strength Index (RSI) indicator currently at 37.

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This concludes our weekly recap. Have a great weekend and see you next week! 👋