On Friday, stocks headed for their biggest weekly gain in a year, while bonds rose and the dollar fell as investors welcomed the pause in raising US interest rates. US jobs data due later in the day appeared to be the next major focus. Benchmark 10-year Treasury yields have fallen by more than 20 basis points in two sessions since the US Federal Reserve left interest rates unchanged on Wednesday, and Chairman Jerome Powell said risks to the outlook for interest rate settings were balanced.
Cash Treasuries were not traded in Asia due to the holiday in Japan, and 10-year futures maintained their recent gains meaning yields were flat at 4.67%. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.9%. S&P 500 futures fell 0.1%, dragged down by a 3% decline in Apple Inc (AAPL.O) shares in after-market trading after the tech giant’s sales forecasts fell short of expectations. European futures rose 0.4%.
Global stocks (.MIWD00000PUS) rose 4.3% for the week so far, their biggest weekly rise since November 2022. “Markets have become increasingly confident that U.S. interest rates have now peaked,” analysts said in a note. That makes sense… Powell warned that for rising bond yields to prevent another rise, they need to stay high, so markets can’t have the proverbial cake and eat it too.” The US Treasury also said on Wednesday it would sell… Longer-term debt at auction for less than expected
The Bank of England left interest rates unchanged
A lower-than-expected manufacturing survey helped boost bets that there will be no need to raise interest rates again. On Thursday, the Bank of England also left interest rates unchanged and confirmed that it does not expect to cut them anytime soon. Ten-year bonds saw their biggest rise in more than a month, sending yields down nearly 12 basis points to 4.39%. German 10-year bond yields also fell on Thursday, although they fell by only 4.6 basis points to 2.71%.
Rabobank analysts said: “There appears to be a fair group of investors waiting on the sidelines and ready to play with lower returns, and yesterday they removed some potential obstacles to enacting this view, and salaries are looming on the horizon and in the foreign exchange markets, it appears that the Australian and New Zealand dollars will achieve their strongest gains.” weekly since July, with increases of 1.5% and 1.6% so far.
The Australian dollar, which settled at US$0.6413 on Friday, was helped by a third-quarter inflation surprise that had traders betting on an interest rate hike from the Reserve Bank of Australia (RBA) on Tuesday and the New Zealand dollar rising with the tide. “Going forward, the downside for the Australian dollar may be limited as we expect a wide range of support policies from the Chinese authorities to help support the yuan and thus the Australian dollar,” strategists at UOB in Singapore said.
In addition, broad-based US dollar weakness as the Fed ends its interest rate hike cycle is likely to spur a recovery in the AUD/USD. The next catalyst for currency movements is likely to be US jobs data. Economists expect the United States to add 180,000 jobs in October.
The worst performing G10 currencies during the week are the Japanese Yen
The worst performing G10 currencies during the week were the Japanese yen and Swiss franc, as investors sought riskier assets. The Bank of Japan will continue to unwind its ultra-loose monetary policy next year, although the slow progress was cold comfort for the yen, which has been hurt by lower interest rates in Japan, six sources familiar with the Bank of Japan’s thinking said.
It traded flat at 150.28 to the dollar on Friday. Brent crude futures fell 3.7% during the week to $87.10 per barrel. Gold fell 1% to $1,986 an ounce. Meanwhile, Bitcoin appears to be reviving the momentum that collapsed along with the stock market in 2022 by stealing from customers on Thursday. There was no immediate market reaction, leaving Bitcoin holding its recent sharp gains at $34,450
Performance of G10 currencies The Japanese yen and the Swiss franc performed the worst during the week reviewed. This is because investors continue to search for high-risk assets. The Bank of Japan’s policy: The article indicates that the Bank of Japan intends to continue unwinding its ultra-loose monetary policy next year, despite slow progress in this context.
The Japanese yen indicated that the Japanese yen was negatively affected by the decline in interest rates in Japan and remained trading at a certain level relative to the dollar. In global markets, oil prices (Brent crude) and the price of gold declined during the review week. Bitcoin has witnessed a collapse in the year 2022, but at the same time, it is starting to regain momentum at the present time.
Current valuations are another opportunity to re-exposure to stocks
After the late summer slump in stocks, current valuations may provide another opportunity to re-exposure to stocks, especially for those that have not risen as much this year.” She also noted that interest rates are currently high, with the Federal Reserve raising its key interest rate to the 5.25 range. % – 5.50% in July, providing “a good opportunity to invest in bonds and more protection against any unexpected rises.”
On the other hand, David Kelly of JPMorgan Asset Management warned that the Federal Reserve risks pushing American consumers into a “dangerous place if it raises interest rates again while inflation is already slowing.” Federal Reserve Chairman Jerome Powell stressed at the recent Jackson Hole seminar that the work on reducing inflation is not done, but the sharp slowdown in the headline CPI and the resilient economy has fueled expectations of another stabilization of rates at this month’s meeting.
The US Federal Reserve meeting report, called the “BEIGE BOOK,” also showed a slowdown in economic growth and the job market last July and August. The report expected that wage growth would continue to slow broadly in the near term in the American market. The report indicated that the consumption sector remains strong, especially in spending on travel and services, despite interest rates remaining high.