Inflationary pressures continue to ease in Germany. The Bank of Japan maintained its soft monetary policy

Western Digital shares are up more than 7% after the company reported better-than-expected first-quarter earnings and announced its intention to split into two public companies. Additionally, shares of Amazon.com (AMZN) closed higher by more than 3%, adding to last Friday’s 7% gain after Guotai Junan Securities raised the company’s price target to $162.80 per share.

The Dallas Fed’s US manufacturing activity index for October unexpectedly fell by 1.1 to minus 19.2, weaker than expectations for a rise to minus 16.0.

Bank of Canada (BoC) Governor Tiff Macklem urged elected officials to consider the inflationary implications of their spending plans as the Central Bank tries to cool price pressures. Macklem cited slower economic growth and higher interest rates as factors affecting future government budgets. Canadian Finance Minister Chrystia Freeland will deliver a financial report in the coming weeks.

The Eurozone Economic Confidence Index for October fell by 0.1 to 93.3, which was better than expectations of 93.0. German Q3 GDP declined by 0.1% QoQ, stronger than expectations of 0.2% QoQ. The German Consumer Price Index (EU harmonized) for October declined from 4.3% to 3.0% y/y, better than expectations of 3.3% y/y and the lowest inflation rate in 2 years.

ECB Governing Council representative Kazimir said yesterday that forecasts for ECB interest rate cuts in the first half of next year are completely misplaced, and the ECB will have to stay on the cusp over the next few quarters. In contrast, his counterpart, Simkus, believes that the ECB will not raise interest rates at its December meeting, saying that current restrictive levels are sufficient.

WTI crude oil prices fell more than 3% yesterday as Israeli military action in the Gaza Strip proceeded at a more cautious pace than expected, easing fears of a widening conflict in the Middle East. In addition, Iran’s foreign ministry said on Monday that Hamas has pledged to release non-Israeli hostages as soon as possible.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.95%, China’s FTSE China A50 (CHA50) added 0.35%, Hong Kong’s Hang Seng (HK50) was up by 0.04% on the day, and Australia’s ASX 200 (AU200) was negative 0.79% on Monday. On Tuesday, Asian stocks fell to near one-year lows amid disappointing Chinese manufacturing activity data, while the yen fell to 150 per dollar after the Bank of Japan changed its policy to control bond yields.

At its meeting, the BoJ left the short-term interest rate at minus 0.1% and said it would use the top end of the YCC’s 1% range as the reference limit for its market operations. The move reflects a slight shift to tight YCC policy and may signal some greater flexibility. The BoJ also said it will continue asset purchases and quantitative easing to stimulate the economy, citing continued uncertainty over rising inflation and deteriorating global economic conditions. The statement indicated that the Bank is trying to maintain a balance between supporting the Japanese economy, curbing further weakening of the yen, and simultaneously combating rising inflation. The BoJ also said it expects core consumer inflation to remain above the 2% target through fiscal 2024 and that risks to prices are skewed upward in fiscal 2023.