Summary: The surge in US job openings brought another selloff in bonds and equities, and prompted a suspected yen intervention as USDJPY rose above 150. Oil and gold, however, stabilised despite the broader risk-off. RBNZ meeting on tap today and AUDNZD is at four-month lows.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: Markets sold off as the 10-year Treasury yield surged to 4.80% following the unexpectedly strong job openings data. The S&P500 fell by 1.4% to 4,229 while the Nasdaq100 plummeted by 1.8% to 14,566. VIX, the gauge of fear, jumped by more than 2 points to 19.78, marking its highest level since May. The S&P 500 is poised to test its 200-day moving average at 4,202.
Fixed income: Yields gained momentum as they surged higher following the release of a JOLTS report indicating that the US labor market remains strong. The selling pressure persisted throughout afternoon trading, causing yields across the curve to close near their daily highs. The 10-year yield surged by 12bps to reach a new 16-year high at 4.81% and close at 4.80%. Meanwhile, the 2-year yield climbed by 5bps to 5.15%. The 2-10-year curve bear steepened by 7bps, bringing it to -36.
In Saxo’s Q4 Quarterly Outlook, "Bond. Long Bond(s)", we look at how an economic slowdown and ‘peak rates’ could push us toward a stagflation lite environment and an opportunity to go long bonds.
China/HK Equities: Absent the southbound Stock Connect buying from mainland investors, the Hang Seng Index plummeted about 2.7%, driven by consumer and property stocks. The Hang Seng Tech Index dropped by 2.6% with Internet and EV names taking a step back. Despite the positive headlines regarding tourism and consumption during the Golden Week, investors are wary of the pace of China’s pace of economic recovery and the surge in bond yields in the U.S.
FX: While yields saw another fresh surge on the back of US data showing a still-tight labor market, dollar gains were capped by a suspected yen intervention although Japanese officials have denied any intervention. USDJPY rose to highs of 150.16 before a sharp decline to 147.43 but yen weakness returned and pair was back above 149 in Asia morning. AUDUSD plunge extended to the 0.63 handle after RBA sounded comfortable with the inflation trajectory, while NZDUSD has not sustained the move below 0.59 for now and RBNZ meeting is eyed today. Expectations are for a hawkish hold with elections due soon.
Commodities: Oil and gold stabilised after some selling earlier in the week. Brent crude rose back to $91/barrel, and focus turns to Joint Ministerial Monitoring Committee meeting today while discussions to restart the Iraqi oil flows through the Turkish pipeline are still ongoing. Gold also recovered above $1820 despite the fresh surge in yields and $1800 key support remains in focus.
Macro:
In the news:
For all macro, earnings, and dividend events check Saxo’s calendar.
For a global look at markets – go to Inspiration.
The end of the road
Emboldened by surging crude oil prices, Saudi Arabia makes waves on the international stage, as Crown Prince Mohammed bin Salman manages to create a World Champions League, after buying the UEFA Champion League franchise.
As the world embraces GLP-1 obesity wonder drugs, the people next in line to get a prescription stop caring about dieting and exercising, figuring that the drug will later solve all of their weight-related health problems.
With the US budget deficit spiraling above 10% of the GDP, the government is desperate to foster demand for US Treasuries. Under intense pressure from the White House, Congress makes income from government bonds tax-free.
After a criminal group deploys the most deceptive AI deepfake ever seen, generative AI becomes a national security threat. With public distrust soaring, governments crack down with harsh new laws, puncturing the AI hype.
To fix the divergence in the global trade and financial system, the largest deficit countries unite to negotiate new world trade terms. For surplus countries, the reset of the global economic model is a painful adjustment.
As discontent with Biden and Trump rises to fever pitch, Robert F. Kennedy Jr sees his support rising inexorably in the polls. On November 5, Kennedy wins the US presidential election, ushering in a new era in US politics.
Stepping up Japan's economic transformation in 2024, PM Kishida brings in a host of populist policies to boost domestic demand. As the GDP growth rate hits 7%, the BoJ is forced to abandons its yield curve control policy.
As people wake up to how little tax Europe’s billionaires are actually paying, the EU Commission implements a wealth tax of 2%. The tax sends shockwaves through Europe's luxury industry, with luxury giant LVMH plunging 40%.
