Asia & European Sessions:
- A number of factors weighed on Treasuries and EGBs, but the underlying element was inflation anxiety. Several factors, including concerns over bond supply and stronger US economic data, are contributing to the bond selloff.
- The resilience of the US economy, diminishing expectations for Fed rate cuts, the bounce in Oil prices, the acceleration in rate cut prospects from the BoC, BoE, and ECB, fears of fiscal largess, and the massive stimulus from China all added to the likelihood price pressures could remain sticky.
- Wall Street was mixed in relatively quiet action.
- Additionally, traders are betting on the risk of a Republican win in the US election, which could lead to looser fiscal policy and increased tariffs under Donald Trump, potentially worsening the federal deficit and stoking inflation.
- Asian equities declined for a 2nd consecutive day, along with bonds, as traders reassessed cooling expectations for Federal Reserve rate cuts this year. This followed a decline in US equities after a strong run-up to all-time highs.
- Australian and New Zealand bonds also fell.
- Investors in Japan pulled back ahead of the upcoming general election on Sunday, with stocks, bonds, and the Yen all declining simultaneously amid polls suggesting the ruling coalition could lose its majority.
- The Nikkei dropped 1.4%, reaching its lowest level since early October.
- Gold rose to $2,733.41 in Asia, following Monday’s record high of $2,740.59. Gold has surged nearly 30% this year, hitting successive all-time highs, with momentum accelerating as the Fed pivoted to cutting rates. Hedge funds have been increasing net-long positions in gold, and ETF inflows have also contributed to the rally. Traders are also adjusting portfolios ahead of the US election on Nov. 5, with gold seen as a safe bet during times of geopolitical and economic uncertainty.
Financial Markets Performance:
- The USDIndex hit a multi-month high, largely on the less dovish view on Fed policy and reached 104.00, the first time at that level since late July.
- The USDJPY rallied to 151 for the first time since July.
- Oil prices increased 1.9% to $70.54 per barrel.
- Gold relinquished another new high at $2740.59 before closing down -0.02% at $2720.85 per ounce.
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Andria Pichidi
Market Analyst
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