First Global Energy Crisis And Sunak`s Appointment as PM | Daily Market Analysis

Key events:

USA - New Home Sales (Sep)  

Canada - BoC Monetary Policy Report     

Canada - BoC Interest Rate Decision  

USA - Crude Oil Inventories  

Canada - BOC Press Conference  

U.S. stock indices rose 1.1-2.3% amid the start of the earnings season. The IEA announced a global energy crisis and sterling continues to strengthen amid the appointment of Rishi Sunak as the new British Prime Minister, the third in less than 3 months. major European banks began reporting results that were perceived differently. Here's what you need to know about the financial market on Tuesday, October 25.

● U.S. stock indices rose yesterday for the third straight session, with the Dow Jones Industrial Average reaching its highest level in six weeks. Positive factors for the market were good corporate reports and falling government bond yields.

"We're seeing government bond yields go down for the first time in a long time, so stocks went up," said B.Reily Wealth Chief Market Analyst Art Hogan.

Traders have come to expect less aggressive moves from the Federal Reserve at this year's last meeting.

As the Fed's prime rate futures show, the probability of a 0.5 percentage point hike in December is now estimated at 52%, while the possibility of a 0.75 percentage point hike has dipped to 46%. On Monday, the situation was the opposite, with 43% of traders betting on a half-point increase and 0.75p. – 55%, according to CME FedWatch data.

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The Dow Jones Industrial Average rose 337.12 points (1.07%) to 31836.74 on Tuesday. The Standard & Poor's 500 rose 61.77 points (1.63%) on the day to 3,859.11 points. The Nasdaq Composite Index by the end of the session rose by 246.5 points (2.25 percent), ending the day at 11,199.12 points.

● The first truly global energy crisis

The world is in the middle of "the first truly global energy crisis," the head of the International Energy Agency said Tuesday, citing a shrinking liquefied natural gas market around the world and supply cuts by major oil producers.

Increased LNG imports into Europe amid the Ukraine crisis and a potential rebound in China's appetite for the fuel will tighten the market significantly, according to Fatih Birol, executive director of the IEA, adding that OPEC+'s recent decision to cut oil production by 2 million barrels a day was a "risky" move.

Europe can survive this winter if the weather stays mild, Birol added, but the possibility of rationing still exists if the winter is extremely cold and long, or if there are any surprises, such as the explosion of the Nord Stream pipeline.

● Sunak appointed as the new British Prime Minister

Rishi Sunak has been officially appointed Prime Minister of Great Britain. The move was well received by the market, as the former finance minister is seen as the most fiscally prudent of all possible options.

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The pound rose another 0.4 percent against the dollar on Tuesday, while the yield on the benchmark 10-year bond was little changed, having fallen sharply on Monday when he won a poll to become the leader of the ruling Conservative Party.

The 42-year-old former finance minister became Britain's third prime minister in less than two months, the youngest in 200 years. He now faces the daunting task of overcoming a growing economic crisis, warring political parties, and a deeply divided country.

"We need stability and unity now, and I will make it my top priority to unify our party and our country," Sunak said Monday.

● European banks' earnings reports

Tuesday marked the start of the quarterly earnings season for major European banks; with UBS (SIX: UBSG) and HSBC (LON: HSBA) reporting very differently received by the market.

The Swiss banking giant reported a smaller-than-expected 24% drop in third-quarter net income, which boosted its shares by more than 5%, as strong customer inflows and lower costs helped smooth out the impact of a turbulent financial market.

By contrast, HSBC shares fell more than 6% after the London-based bank reported a 42% drop in third-quarter profit, driven by credit losses and costs from the sale of its French business.

HSBC also named Georges Elderly as its new CFO on Tuesday, a surprise move that puts him in a good position to eventually succeed Noel Quinn as CEO.