Asia & European Sessions:
- The markets were weaker Monday as players continued to adjust to Friday’s strong September data and price out aggressive rate cut expectations. In fact Fed funds futures have not only taken out risks for -50 bps next month, but now reflect chances for no action at all.
- Wall Street was in the red all session and the selloff extended into the close, in part given the pop in rates.
- Asian markets mostly corrected, with the Hang Seng leading the way and plunging -7.1% as mainland China bourses returned from a week-long holiday. The CSI 300 rose 5.8% in catch up trade, but failed to match the rally seen elsewhere over the past week.
- Investors were disappointed by the briefing from the Chinese National Development and Reform Commission, which did not present any additional stimulus measures. Instead, a CNY 100 billion investment plan scheduled for next year will be brought forward. China also announced a plan to issue special purpose bonds designed to stimulate local government growth.
- According to FT: ”Hong Kong equities were on track for their worst single-day performance since the global financial crisis on Tuesday, even as stocks in mainland China rose on their first day of trading after an extended break.”
- RBA minutes suggested that the bank will keep interest rates at their 12-year high until inflation shows consistent signs of nearing its target. Minutes also reveal that the board considered both tightening and easing monetary policy, depending on future economic conditions. For now, they have decided to maintain the rate at 4.35%, reflecting uncertainty in the economic outlook.
Financial Markets Performance:
- The USDIndex closed at 102.493 after hitting a high of 102.620, the best since August 15.
- USOil rallied 3.9% to $77.87 per barrel prior to retreating to $75.44.
- Gold holds $2620 floor for a 3rd week in a row.
- Treasury yields hit their highest levels since the summer. The NASDAQ dropped -1.18%, while the S&P500 slumped -0.96%, with the Dow off -0.94%.
- Nikkei lost 1.2% to 38,861.09.
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Andria Pichidi
Market Analyst
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