Asia & European Sessions:
- Bloomberg – Traders buy China-linked assets everywhere on bets for more aid.
- US and European stock futures slipped, while Asian shares gave up some of their earlier gains as investors weighed the sustainability of China’s recent market rally. Chinese equities climbed on optimism that Beijing’s extensive stimulus efforts would spark a recovery in the sluggish economy.
- The bullish momentum extended, after the plunge in consumer sentiment which boosted rate cut hopes with the futures pricing in -40 bps in November and -80 bps in total by December. Consumer confidence also raised concerns about a weakening labor market.
- The data weighed on the USDindex.
- Nvidia’s jump of 4% was the strongest force lifting the S&P 500 index.
- The yield curve is out 2 bps at 18.5 bps, the widest since the summer of 2022, and has been in positive territory since September 6. Curve steepness remains the bet with the FOMC in rate cut mode, while inflation considerations will limit gains at the long end, if not keep the yield relatively elevated.
- Commodities zoomed as the stimulus measures boosted growth expectations. The weaker DXY supported too.
Fed funds futures firmed on the data, pricing increased risk for another -50 bp reduction in one of the two remaining FOMC meetings this year. The implied November rate reflected -40 bps in cuts on the knee-jerk move, but has backed up slightly to -39 bps. The market is also showing a cumulative -79 bps in cuts by December, with January 2025 showing -112 bps.
Financial Markets Performance:
- The USDIndex was the loser amid the dovish Fed outlook, slumping to 99.90, with the break of the 100 support adding to the selloff.
- Oil rose 1.46% to $72.20 per barrel before retreating back to 70.90-71 area.
- Iron and Gold posted new record highs, with the latter climbing by 1.5% to $2670 per ounce, yet another fresh peak.
- The offshore Yuan strengthened past 7 per dollar for the first time since May 2023, while the US dollar fell to an 8-month low.
- The EURUSD spiked to 1.1198, just a breath away from the key 1.1200 .
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Andria Pichidi
Market Analyst
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