Daily Global Analysis By zForex

[Z Forex]

Global Markets Grapple with Inflation Worries as Oil Prices Surge and Bonds Face Pressure​

Asia shares slumped, but US equity futures and Treasuries stabilized as oil prices surged, heightening concerns about inflation. The US benchmark oil price reached $95 a barrel, the highest in over a year, due to falling stockpiles, contributing to worries about persistent inflation. This pushed the 10-year Treasury yield near 4.6%, its highest since 2007. US and European equity futures showed marginal gains, while Asian stocks struggled, with Japan, New Zealand, and Hong Kong falling over 1%. A global equities index faced its tenth consecutive loss, matching a 12-year record. September proved challenging for global stocks and bonds, with the 10-year Treasury yield rising significantly, and US corporate bonds dipping into negative territory for 2023.

Seasonally adjusted retail sales in Australia climbed 0.2% in August compared to the prior month. It was slower than the 0.3% expected by economists polled by Reuters.

In China, mainland shares declined, and Chinese developers continued to face losses, including Evergrande Group. The Bloomberg dollar index fell slightly after a six-day rally, while the yen strengthened but remained near 150 per dollar. Japan's 20-year yield reached its highest since 2014, and Australian and New Zealand rates also increased. Minneapolis Federal Reserve President Neel Kashkari noted potential economic slowdowns due to a US government shutdown and an autoworker strike, suggesting less aggressive monetary policy.

Market observers anticipated key data releases, including US GDP and initial jobless claims, along with the personal consumption expenditures price. A large options position held by a JPMorgan Chase & Co. equity fund raised concerns of potential market dislocations.

 

[Z Forex]

Global Market Insights: Inflation Trends, Summit Talks, and Economic Data

Asia-Pacific markets mostly gained on the week's last trading day, led by Hong Kong's Hang Seng index. Inflation in Tokyo showed a year-low increase at 2.8% for September, down from August's 2.9%, marking its lowest since September 2022, and serving as a key indicator for nationwide inflation trends. The Wall Street Journal reported discussions between China's Vice Premier He Lifeng and Foreign Minister Wang Yi regarding potential visits to the US, in preparation for a potential summit between Xi Jinping and Joe Biden.

European markets started positively on Friday, breaking a five-day losing streak from the previous session. Unexpectedly, French price growth slowed, while investors awaited euro zone inflation data following Germany's preliminary figures indicating a greater-than-expected slowdown in inflation. Germany also saw a surprising decline in retail sales for August due to persistently high inflation.

In the US, the Commerce Department's final estimate reported a 2.1% annualized increase in real gross domestic product for the second quarter, aligning with the previous reading but falling short of Dow Jones' estimate of 2.2%. Later in the day, the US personal consumption expenditures price index would be closely watched, potentially influencing whether the Federal Reserve raises rates from their 22-year highs.

 

[Z Forex]

Global Economic Update: Asia-Pacific Stocks Dip, China's Manufacturing Rebounds, and European Markets Rally

Asia-Pacific stocks faced a decline in their values, even in the wake of a notable recovery in China's manufacturing sector, which managed to push its way back into expansion territory. Meanwhile, during its September meeting, the Bank of Japan's policymakers conducted a thorough evaluation of various conditions that must be met before considering the possibility of ending the central bank's ultra-loose monetary policy.
The sentiment among major Japanese manufacturers in the third quarter demonstrated a significant improvement, with the closely watched Central Bank Tankan survey reporting a score of 9, up from 5 in the previous three months.
China, on the other hand, saw its factory activity expand in September, marking the first expansion since April. Official data over the weekend revealed that China's Purchasing Managers' Index (PMI) climbed to 50.2, surpassing Reuters' expectations of 50.0, which is a positive sign for the world's second-largest economy.
In Europe, markets opened on a positive note on Monday, buoyed by indications that the recent pace of consumer price increases might be slowing down. Eurozone inflation for the month of September tumbled to 4.3%, its lowest level since October 2021, according to flash data. Notably, the European Central Bank had raised interest rates to a record level the previous month; however, economists and investors now anticipate that these rates may have reached their peak.
Shifting focus to the United Kingdom, house prices held steady in September when compared to the prior month, according to data from lender Nationwide. However, it's important to note that they were down by 5.3% year-on-year, highlighting the ongoing challenges in the British property market.

 

[Z Forex]

Global Economic Update: Asia-Pacific Stocks Dip, China's Manufacturing Rebounds, and European Markets Rally

Asia-Pacific stocks faced a decline in their values, even in the wake of a notable recovery in China's manufacturing sector, which managed to push its way back into expansion territory. Meanwhile, during its September meeting, the Bank of Japan's policymakers conducted a thorough evaluation of various conditions that must be met before considering the possibility of ending the central bank's ultra-loose monetary policy.
The sentiment among major Japanese manufacturers in the third quarter demonstrated a significant improvement, with the closely watched Central Bank Tankan survey reporting a score of 9, up from 5 in the previous three months.
China, on the other hand, saw its factory activity expand in September, marking the first expansion since April. Official data over the weekend revealed that China's Purchasing Managers' Index (PMI) climbed to 50.2, surpassing Reuters' expectations of 50.0, which is a positive sign for the world's second-largest economy.
In Europe, markets opened on a positive note on Monday, buoyed by indications that the recent pace of consumer price increases might be slowing down. Eurozone inflation for the month of September tumbled to 4.3%, its lowest level since October 2021, according to flash data. Notably, the European Central Bank had raised interest rates to a record level the previous month; however, economists and investors now anticipate that these rates may have reached their peak.
Shifting focus to the United Kingdom, house prices held steady in September when compared to the prior month, according to data from lender Nationwide. However, it's important to note that they were down by 5.3% year-on-year, highlighting the ongoing challenges in the British property market.

 

[Z Forex]

Global Economic Snapshot: Market Trends, Inflation, and Fed's Policy Stance

Overnight in the Asia-Pacific markets, Hong Kong stocks led losses by falling approximately 3%, with the Hang Seng index trading 3.12% lower after the National Day holiday. This decline was driven by the real estate and energy sectors. Meanwhile, the Reserve Bank of Australia held interest rates steady at 4.1%, aligning with Reuters' expectations. The bank's governor, Michele Bullock, mentioned that although inflation in Australia has peaked, it remains high and is expected to stay that way. She highlighted that while goods inflation has eased, many service prices are still rising, along with fuel prices.
European markets are set to open flat to lower following concerning economic data from the region. European stock markets closed lower on Monday, as manufacturing output showed signs of decline, with new orders dropping significantly. In the UK, shop prices in September increased by 6.2% annually, a decrease from August's 6.9%, marking the lowest rate in a year. Food price inflation also cooled to 9.9%, with a slight monthly decline, the first in over two years.
Weakness in bond markets followed a Treasury slump on Monday due to hawkish Fed messaging, overshadowing optimism about avoiding a US government shutdown. Yields on five- to 30-year Treasuries rose by about 10 basis points, and the 10-year note reached its highest point since 2007. Fed Governor Michelle Bowman expressed willingness to support a federal funds rate increase if inflation progress stalls. Fed Vice Chair for Supervision Michael Barr suggested that rates are approaching a sufficiently restrictive level. Fed Chair Jerome Powell, during a visit to York, Pennsylvania, reiterated the need for a restrictive policy for some time, as did the influential New York Fed Chief John Williams on Friday. Cleveland Fed leader Loretta Mester also indicated that the Fed's work is likely not complete.

 

[Z Forex]

Global Economic Snapshot: Market Trends, Inflation, and Fed's Policy Stance

Overnight in the Asia-Pacific markets, Hong Kong stocks led losses by falling approximately 3%, with the Hang Seng index trading 3.12% lower after the National Day holiday. This decline was driven by the real estate and energy sectors. Meanwhile, the Reserve Bank of Australia held interest rates steady at 4.1%, aligning with Reuters' expectations. The bank's governor, Michele Bullock, mentioned that although inflation in Australia has peaked, it remains high and is expected to stay that way. She highlighted that while goods inflation has eased, many service prices are still rising, along with fuel prices.
European markets are set to open flat to lower following concerning economic data from the region. European stock markets closed lower on Monday, as manufacturing output showed signs of decline, with new orders dropping significantly. In the UK, shop prices in September increased by 6.2% annually, a decrease from August's 6.9%, marking the lowest rate in a year. Food price inflation also cooled to 9.9%, with a slight monthly decline, the first in over two years.
Weakness in bond markets followed a Treasury slump on Monday due to hawkish Fed messaging, overshadowing optimism about avoiding a US government shutdown. Yields on five- to 30-year Treasuries rose by about 10 basis points, and the 10-year note reached its highest point since 2007. Fed Governor Michelle Bowman expressed willingness to support a federal funds rate increase if inflation progress stalls. Fed Vice Chair for Supervision Michael Barr suggested that rates are approaching a sufficiently restrictive level. Fed Chair Jerome Powell, during a visit to York, Pennsylvania, reiterated the need for a restrictive policy for some time, as did the influential New York Fed Chief John Williams on Friday. Cleveland Fed leader Loretta Mester also indicated that the Fed's work is likely not complete.

 

[Z Forex]

U.S. Manufacturing Shows Signs of Recovery Amidst Challenges: Institute for Supply Management (ISM) reported for September

The Institute for Supply Management (ISM) reported that U.S. manufacturing showed signs of recovery in September, with increased production and employment. This positive trend was the third consecutive month of improvement, boosting expectations for stronger economic growth in the third quarter. The Commerce Department's data also indicated solid construction spending in August, fueled by housing and factory construction.
The ISM's manufacturing Purchasing Managers' Index (PMI) rose to 49.0 in September, the highest since November 2022, up from 47.6 in August. However, it's noteworthy that this marked the 11th consecutive month with a PMI below 50, indicating a contraction in manufacturing. This extended stretch of contraction is the longest since the 2007-2009 Great Recession.
Economists had anticipated a more modest increase, with the index edging up to 47.7. The PMI surpassing 48.7, which is considered a threshold for economic expansion, added to optimism. Third-quarter growth estimates ranged as high as a 4.9% annualized rate, compared to the 2.1% growth rate in the April-June quarter.
The ISM survey revealed that five manufacturing sectors reported growth in September, including textile mills and primary metals, while 11 industries, including computer and electronic products and machinery, reported contraction.
Despite the mixed responses from survey participants, some noted stable conditions while others expressed concerns about factors like the Panama Canal drought and supply chain disruptions. Nevertheless, the overall resilience of the economy has led to hope that a recession may be avoided in the near future.
In addition to the PMI, other economic indicators, such as orders for durable goods and business spending on equipment, indicated strength in the manufacturing sector. New orders in the ISM survey improved, leading to increased factory production.
Factory employment also rebounded after a slump in July, with the employment gauge rising to 51.2 in September. However, challenges like attrition and hiring freezes persisted.
In terms of prices, the survey revealed that manufacturers paid lower prices for inputs, with the prices-paid measure dropping from 48.4 in August to 43.8 in September. While this suggests goods disinflation, it's worth noting that auto workers' strikes and rising energy prices could potentially impact prices in the future.
Construction spending continued to show strength, with a 0.5% increase in August, driven by spending on housing and factory construction. However, high mortgage rates posed a potential threat to this momentum.

 

[Z Forex]

Market Volatility and Central Bank Actions Amid Rising Bond Yields

On Wednesday, Asia-Pacific markets experienced widespread weakness, with Korean and Japanese stocks both declining by over 2% following a 16-year high in the U.S. 10-year Treasury yield. The Japanese yen strengthened against the U.S. dollar, briefly reaching 150 overnight. When asked about potential intervention to support the yen, Japan's Finance Minister Shunichi Suzuki declined to comment but mentioned Japan's readiness to respond to significant currency movements.
Meanwhile, the Reserve Bank of New Zealand decided to keep its key interest rate at 5.5%. Despite stronger-than-expected GDP growth in the June quarter, the bank noted a subdued growth outlook for the country. New Zealand's GDP rose by 3.2% compared to the same period last year.
In the US, job openings increased to 9.61 million in August, up from less than 9 million the previous month, according to the Bureau of Labor Statistics. This report led swaps traders to raise their bets on the Federal Reserve raising rates in December to over a 50% probability.
Atlanta Fed President Raphael Bostic, who is not voting this year, emphasized the need to keep rates elevated for an extended period. He projected a single rate cut in 2024, likely towards the end of the year. These comments followed a series of hawkish statements from other Federal Reserve policymakers.
The global bond selloff persisted, with investors adapting to a new era of higher-for-longer interest rates. Yields continued to rise, with the 10-year Treasury yield reaching a fresh 16-year peak, and the benchmark 10-year Japanese government bond yield remained at a 10-year high. These developments contributed to a risk-averse and unsettled European session, as indicated by futures pointing to a lower market opening.

 

[Z Forex]

Global Financial Markets Respond to Jobs Data and Oil Price Drop

European equity futures followed the upward trend seen in Asian markets, as both stocks and bonds experienced gains on Wall Street. This provided some relief to financial markets that had recently endured a series of harsh losses. The rally in stocks and bonds came after weaker-than-expected jobs data led to a decrease in U.S. Treasury yields from their 16-year highs.
In September, U.S. companies added the fewest jobs since the beginning of 2021, as reported by a survey conducted by the ADP Research Institute in collaboration with the Stanford Digital Economy Lab. Another report from the Institute for Supply Management indicated a slight contraction in the services sector last month, marking the lowest level of the year. Forecasts for Friday's nonfarm payroll figures suggest a slowdown in hiring for September.
Additionally, there was a significant 5% drop in crude oil prices, which is noteworthy as it represents the largest drop in over a year, pushing oil prices below their levels from a year ago. This decline in oil prices has removed the inflationary pressures associated with oil. This shift in the macroeconomic outlook and concerns about reduced fuel demand gained prominence following a meeting of the OPEC+ panel, consisting of the Organization of the Petroleum Exporting Countries and its allies led by Russia.
During the OPEC+ ministerial panel meeting, no changes were made to the group's oil output policy. Saudi Arabia announced its commitment to maintaining a voluntary cut of 1 million barrels per day (bpd) until the end of 2023, while Russia pledged to continue a 300,000 bpd voluntary export curb until the end of December.

 

[Z Forex]

Surprising Job Growth in September Raises Questions for the Federal Reserve
The payrolls report delivered a positive surprise, as employers added 336,000 jobs in September, marking the highest figure since January and nearly double the median estimate. Furthermore, revisions to prior months' data added an extra 119,000 jobs for July and August.
The unemployment rate remained at 3.8% due to a surge of previously unemployed individuals re-entering the job market. The participation rate also held steady at 62.8%, and average weekly hours remained unchanged. Wages increased by 0.2% from the previous month, but the annual wage growth slowed to 4.2%.
The surge in job gains was primarily attributed to the hospitality-leisure and education-healthcare sectors, aligning with a trend observed over the past year as these industries rebounded from the pandemic's impact, driven by increasing demand for services. Restaurant and bar employment has now returned to pre-pandemic levels.
Regarding the Federal Reserve's perspective, while the headline job numbers and wage growth are strong, some concerns arise from the household survey. Average hours worked have remained flat and are below last year's levels, and the participation rate hasn't changed significantly. This suggests that employers may not be drawing more workers from the sidelines. Consequently, there's uncertainty about how the Fed will interpret this report in terms of future interest rate hikes.

 

[Z Forex]

Powell's Inflation Challenges, Monetary Policy, and Economic Outlook: A 2023 Analysis

Federal Reserve Chairman Powell faces a complex set of challenges in his efforts to control inflation and steer the US economy toward stability. Inflation levels have undergone a significant shift, with the Core PCE gauge falling below 4.0a% for the first time in over two years, sending positive signals to the market. However, Chairman Powell and the Federal Reserve confront multifaceted inflation challenges.
The recent surge in oil prices has sparked concerns, affecting consumers through higher energy bills and exacerbating inflationary pressures. Furthermore, the labor market's strength, characterized by exceptionally low unemployment levels, has resulted in more significant, sustainable wage hikes. This, in turn, has contributed to inflation, especially in sectors grappling with labor shortages.
The Federal Reserve's decision-making relies heavily on data, and a rate cut is contemplated if certain conditions align. This includes an unemployment rate slightly above 4%, ideally around 4.5%, coupled with slowing wage growth and a core PCE inflation rate below 3%. The potential timeframe for rate cuts appears to be the end of the second quarter of 2024, as historical data suggests that maintaining high rates for an extended period poses risks to the economy.
Chairman Powell and the Federal Reserve find themselves navigating an economy characterized by high inflation levels and a strong labor market. Raising interest rates beyond the 5% threshold is seen as necessary to mitigate inflationary pressures. However, the challenge lies in accurately projecting economic developments and determining the optimal time to commence rate cuts in 2024 to avoid triggering a severe recession.
The long-standing 2% inflation target is under scrutiny, as it may no longer suit current economic dynamics. In the short term, this target appears overly restrictive, especially given recent inflation rates exceeding 8% before declining. Some argue that a 3% inflation target could offer a more balanced approach, alleviating economic pressure without risking a recession.
Shifting bond yields have raised concerns about a potential economic slowdown or recession. Mounting US debt, coupled with a substantial government budget deficit, has led to an oversupply of bonds in the market, contributing to uncertainty in the bond market.
The US stock market displays a notable pattern of reversal, driven by factors such as elevated interest rates, the Federal Reserve's signaling of an extended stance on rate maintenance, and the potential for a year-end rate increase. These elements are creating uncertainty around high-risk assets and affecting investor sentiment.
Yields are benefiting from these circumstances, strengthening the US dollar. Economic data from various developed countries, excluding the US, suggest a potential slowdown in activity. Anticipation is growing that the US may also experience economic deceleration. Consequently, third-quarter earnings may not suffice to drive a stock market rebound, with macroeconomic developments taking center stage.
As Chairman Powell grapples with inflation control and monetary policy, the US economy stands at a pivotal juncture in 2023. Accurate forecasting and timely policy adjustments will be crucial to steer the nation away from recessionary risks. Reevaluating inflation targets and monitoring bond market signals are integral to shaping a resilient and stable economic future.

 

[Z Forex]

Middle East Geopolitical Turmoil Sparks Market Uncertainty and Oil Price Surge

European markets opened on a downturn on Monday, as investors evaluated the repercussions of recent Middle East geopolitical turmoil. This turmoil stemmed from a substantial attack by the Palestinian militant group Hamas on Israel over the weekend, resulting in hundreds of casualties. Consequently, oil prices surged by 4% overnight, while U.S. stock futures dipped early Monday. This escalation of violence introduced additional geopolitical risk to already fragile markets grappling with inflation and rising interest rates.
The Israeli-Palestinian conflict took a significant turn on Saturday when Hamas launched an unexpected invasion, catching Israel off guard. This sudden escalation in geopolitical tensions may lead to an immediate surge in oil prices, according to some experts. Additionally, it could contribute to further market volatility, which has been a cause for concern due to persistent inflation and elevated interest rates.
Despite the regional instability, analysts anticipate that its impact on financial markets will be short-lived. Notably, major stock indices in the Middle East, especially Israel's TA-35 stock index, experienced declines, with the latter witnessing its most substantial loss in over three years. However, it rebounded by 0.5% on Monday following a sharp 6.5% drop in the previous session.
Meanwhile, Metro Bank's shares saw a remarkable 20% increase as the UK lender secured a £925 million ($1.1 billion) financing package. This move involved Colombian financier Jaime Gilinski obtaining a controlling interest in the bank, offering much-needed relief to the institution after a tumultuous week.
In terms of upcoming events for the week, investors will closely monitor releases related to China's money supply and new yuan loans, speeches by central bank officials, and economic data releases from various countries.

 

[Z Forex]

The Palestinian-Israeli War Had a Significant Impact on Global Financial Markets, Causing Them to Experience Turbulence And Uncertainty

Yesterday, the macroeconomic calendar in the market remained calm. However, the statements made by Federal Reserve (Fed) authorities Logan, Barr, and Jefferson were carefully monitored. Fed official Logan's comments on the rising bond yields attracted significant attention. Logan pointed out that the increasing U.S. bond yields might facilitate the process of tightening monetary policy, potentially eliminating the need for additional interest rate hikes by the Fed. Furthermore, Logan emphasized the current high levels of inflation, underscoring the influence of a robust labor market on inflation dynamics. He suggested that to reach the Fed's 2% inflation target, it is compulsory to maintain a course of tightening policies.

On the other hand, on Saturday, Hamas forces launched a surprise attack from the Gaza Strip into southern Israel, resulting in over 700 Israeli casualties, predominantly civilians. Around 260 people attending a music festival near Gaza's northern border were killed by Hamas militants. In retaliation, approximately 400 Palestinians lost their lives in Israeli counterattacks. Israel reclaimed control of areas previously held by Hamas and recaptured numerous territories. A protracted military operation in Gaza, potentially lasting for months, is anticipated.

Following the rise in tension in the Middle East, oil prices rose by up to 5%, and gained some of last week's losses. With the war risk returning to the markets, the barrel price of WTI crude oil exceeded 86 dollars. The price of Brent crude oil increased by 4% and found buyers at $88.30. It is worth reminding that Brent and WTI lost value last week due to the slowdown in global growth and the expectation of higher interest rates. Additionally, the yellow metal (gold), reacting with an increase to the possible war news, regained last week's losses and closed Monday at 1961 levels per ounce.

Today, in the U.S., the NFIB small business optimism data will be followed. It should be remembered that the August data was at 91.3 with a monthly decrease of 0.6 points.

 

[Z Forex]

Markets Upbeat with Global Risk Appetite Recovery

Asian stock markets experienced an increase today, mirroring the positive trend in Wall Street. This was driven by a more dovish communication from Federal Reserve officials, which strengthened expectations that the central bank has finished raising interest rates. A softer U.S. dollar and lower Treasury yields also contributed to the positive sentiment.
In addition, there were growing expectations of further interest rate hikes following the previous Federal Reserve meeting. As a result, the yield on the 10-year US Treasury bond reached 4.88% last week, testing its highest level in 16 years. Subsequently, due to both the need for a haven prompted by the tensions in the Middle East and a more dovish stance from the Fed, it dropped by around 20 basis points to 4.63% yesterday. This morning, it has maintained a steady, flat trend.
In the economic calendar, today, we will be monitoring speeches by FOMC members. In the United States, we will also be keeping an eye on the PPI (Producer Price Index) and crude oil inventory data. The Federal Open Market Committee meeting minutes will be released.

 

[Z Forex]

Global Markets React to Economic Developments and Central Bank Policies

In the final hour of trading, Hong Kong stocks surged by nearly 2%, leading a broader rally in the Asia-Pacific region. This was driven by China's sovereign wealth fund purchasing shares of the country's largest banks, which boosted investor confidence. European stock markets also opened on a positive note, building on the strong global momentum seen earlier this week.
The focus has been on whether the US Federal Reserve is considering an end to interest rate hikes, especially after a series of dovish comments from officials. Despite the producer price index coming in hotter than expected, attention is now turning to the release of the consumer price index later today. Wednesday's publication of Fed minutes revealed that officials agreed last month to maintain a restrictive policy for some time while acknowledging the need to balance the risks of overtightening against the goal of curbing inflation.
European Central Bank officials have also emphasized that interest rates may have reached their peak. Bank of Portugal Governor Mario Centeno stated, "Unless unforeseen shocks occur, we believe our decision in September marks the end of rate adjustments." The ECB is set to release minutes from the September policy meeting today.
In other news, data released on Thursday morning indicated that the UK economy grew by 0.2% month-on-month in August, in line with economists' expectations. This follows the International Monetary Fund's projection of the weakest economic growth for the UK among all groups of 7 nations, with a forecast of 0.5% growth this year, compared to 0.7% in the Eurozone and 2.1% in the US.

 

[Z Forex]

Global Markets React to Inflation Data: Hong Kong Stocks Plummet, Europe and U.S. Grapple with Rising Prices

Hong Kong stocks plunged by over 2%, leading losses across the broader Asia-Pacific markets, as investors processed China's inflation and trade data for September.
In September, China's consumer price index remained flat, falling short of the 0.2% increase anticipated by analysts surveyed by Reuters. Additionally, China reported a 2.5% drop in its producer price index, slightly exceeding Reuters' estimated decline of 2.4%.
On a separate note, European stock markets opened lower on Friday, with market sentiment wavering due to fresh U.S. inflation data. In France, consumer price inflation in September stood at 4.9% year-on-year and 5.7% on an EU-harmonized basis, mirroring the previous month's figures. Meanwhile, Spanish annual inflation continued to rise for the third consecutive month, increasing from 2.6% in August to 3.5% in September.
In the United States, the consumer price index, a closely monitored inflation gauge, rose by 0.4% in the month and 3.7% from a year ago, according to a Labor Department report on Thursday. These figures exceeded the respective Dow Jones estimates of 0.3% and 3.6%. The primary driver behind the inflation increase was housing costs. This data has intensified concerns and cast doubt on persistent inflation and its implications for the upcoming Federal Reserve (Fed) meeting and decisions.

 

[Z Forex]

Global Economic Insights: Asian Stocks, Chinese Data, and Inflation Trends

Asian stocks declined despite a series of positive Chinese economic data, revealing ongoing fragility in sentiment. While growth and retail sales figures suggested the economy was gaining ground, the property market continued to be a drag.​

In September, China's retail sales surged, and the urban unemployment rate hit a near two-year low, according to Chinese government data. Additionally, China's third-quarter economic growth surpassed expectations, boosting hopes of reaching Beijing's annual targets for the world's second-largest economy.

However, Chinese property developer Country Garden Holdings expressed uncertainty about meeting its offshore debt obligations.

In Japan, the Bank of Japan unexpectedly initiated bond purchases after the nation's 10-year yield reached a ten-year high. This move followed renewed selling pressure on Japan's sovereign debt, fueled by speculation that the central bank might adjust its ultra-easy monetary policy sooner rather than later.

In European markets, Wednesday saw slight declines as traders monitored corporate earnings, Middle East developments, and crucial inflation data.

The U.K. experienced a 6.7% inflation rate in September, slightly exceeding expectations and remaining significantly above the Bank of England's 2% target. This highlighted the mounting inflationary pressures in the country and added complexity to the task of policymakers, who are expected to maintain unchanged interest rates at the upcoming meeting.

On the other side of the Atlantic, U.S. retail sales exceeded all forecasts, and industrial production strengthened last month. This provided fresh evidence of a robust American consumer whose spending is contributing to the stabilization of the manufacturing sector.

 

[Z Forex]

Global Market Trends and Economic Highlights: Asia-Pacific, Europe, and the U.S​

Asia-Pacific markets saw a significant sell-off, with both South Korean and Hong Kong markets experiencing approximately 2% losses. European markets opened lower on Thursday, as investors assessed the impact of the Middle East crisis, along with earnings and economic data.

In September, Australia's seasonally adjusted unemployment rate dropped to 3.6%, which was contrary to the 3.7% expected by economists polled by Reuters. Japan reported a trade surplus of 62.4 billion yen ($416.6 million) for September, with data from Japan's customs agency revealing a 4.3% increase in exports year on year, while imports declined by 16.3% compared to the same period last year.

The Federal Reserve's Beige Book report, released on Wednesday, indicated that the U.S. economy had shown minimal or no change over the past six weeks. It described spending as "mixed" and noted a modest increase in prices, with companies expecting inflation to rise at a slower pace. Later, the focus will shift to U.S. economic data, including initial jobless claims, to gain fresh insights into the state of the economy.

A busy schedule of Fed speakers will be highlighted by Chair Jerome Powell's appearance at the Economic Club of New York.

 

[Z Forex]

Asia's Property Sector Concerns, Earnings Disappointments in Europe, and Global Interest Rate Trends

In Asia, concerns in the property sector caused declines in Chinese shares, and there were announcements of investigations into Foxconn Technology Group. At the beginning of Asian trading, the yen slipped to 150.11.
European stocks declined due to disappointing earnings, particularly from Volkswagen and Royal Philips. Treasuries and oil prices also fell. The US 10-year note yield increased to 4.98%, while oil dropped to $87 per barrel, and gold fell from a five-month high.
Traders were closely monitoring developments in the Middle East, which included the release of US hostages by Hamas and aid reaching Gaza through Egypt. However, Israel continued air raids on Gaza in preparation for the next phase of its conflict with Hamas.
During this week, traders were seeking hints regarding global interest rates, which included inflation data from Australia and Japan, as well as economic activity data from the US and Europe. Federal Reserve Chairman Jerome Powell was scheduled to give remarks, and the European Central Bank was set to make a policy decision later in the week.
Higher bond yields are posing challenges for equity valuations and may impact companies reporting earnings this week, such as Microsoft, Alphabet, Amazon, Meta, Intel, IBM, General Motors, and General Electric. No major data releases are scheduled for the day.

 

[Z Forex]

The Impact of Rising Treasury Yields on the US Stock Market

US stock market has been experiencing a decline for the last two weeks, with all major indices falling. The decline can be attributed to the influence of US treasuries, which are contributing to a risk-off sentiment. Higher Treasury yields can curb investors' appetite for stocks and other risky assets by tightening financial conditions as they raise the cost. The stock market has been under pressure from the bond market, where the yield on the 10-year Treasury briefly touched 5% Thursday evening for the first time since 2007. High yields make borrowing more expensive for everyone, and they slow the economy while dragging on prices for stocks and other investments. The role played by earnings should intensify this week as some of the tech giants step up to bat. 2023 has seen an overreliance upon a handful of names to drive market upside, with speculation over potential AI revenues helping to lift valuations. Elevated treasury yields continue to put downward pressure on stock valuations. The yield on the 10-year U.S. Treasury note topped 5% early Monday, reclaiming a peak seen last week which marks the highest point for the yield benchmark since 2007. The week ahead will be busy for markets, with earnings due from Microsoft, Alphabet, Amazon, and Meta Platforms. The market was quick to react to this somewhat hawkish Fed outlook. Treasury yields moved sharply higher, as both the 2-year and 10-year yields moved to highs of this cycle, putting downward pressure on stock and bond returns. Longer-duration parts of the market, including technology and growth sectors, underperformed the broader market.
Geopolitical tensions in the Middle East have been a cause of concern for investors in the US stock market. The Israeli-Hamas war has sharpened focus on rising geopolitical risks for financial markets, as investors wait to see if the conflict draws in other nations. In the past week, concerns about the conflict have fed through to asset prices, contributing to weakness in stocks. Safe-haven assets saw buying with gold ended the week up with more than 2.5%.