Asian stocks had trouble getting going, and US stock futures were all over the place. This was because people were still worried that global central banks would keep raising interest rates until inflation was under control, which would increase the risk of a recession.
In Japan, stocks went up by a small amount, but they went down in Hong Kong and Australia. Monday is a holiday in Sydney and South Korea, and Chinese markets will be closed for a week for Golden Week. This could slow down trading in Asia.
Oil prices went up to near $82 a barrel on signs that the OPEC+ alliance might cut production by more than 1 million barrels a day when it meets this week to stop prices from going down. The value of commodities went up. These moves make it more likely that there will be more inflation, which could force central banks to take more aggressive steps.
In a so-called “bull-steepening,” shorter Treasury yields fell more than longer ones. For example, the yield on a two-year note is around 4.2% and the yield on a 10-year note is about 3.8%. The dollar went down a little.
The week started slowly because US stocks lost money for the third straight quarter, which hadn’t happened since 2009. Risky assets have been going downhill fast since the Federal Reserve raised interest rates by a third large amount last month and repeatedly warned that more pain was on the way, risky assets have been going downhill fast.
A group of Saxo Capital Markets analysts wrote in a note, “Risk off seen from multiple forces heading into the new month or quarter as corporate earnings misses continue to raise the threat of an ugly earnings season ahead.”
The rapid depreciation of the yen and the worsening of the global economic outlook caused Japan’s major manufacturers’ confidence to drop for three straight quarters, which was a surprise. This was another thing that hurt local stocks.
On Monday, the world’s attention will be on assets that are tied to Brazil because the country’s presidential election is going to a run-off vote on October 30.
Traders are also paying close attention to the trouble in the UK and what’s going on with Credit Suisse Group after its new CEO tried to calm the markets after its default swaps went up.
Prime Minister Liz Truss said that Chancellor of the Exchequer Kwasi Kwarteng was to blame for the controversial decision to get rid of the highest rate of income tax in the UK. However, the government still plans to go through with the plan, even though it has caused chaos in the market.
On Monday, the pound fell for the first time in five days, and European stock contracts lost more than 2%.
In a note to clients, Citigroup Inc.’s Global Head of Currency Analysis, Ebrahim Rahbari, said, “Last week’s events confirmed our belief that financial conditions will continue to tighten, but also showed that there will likely be short-term volatility in both directions.” With the US dollar, rising real rates, and volatility all playing a role, he wrote, “we remain very bearish about the outlook for global risk assets.”
Investors are now waiting for this week’s jobs report to find out more about how the Fed plans to raise rates. The next inflation and GDP numbers will also show if price pressures are easing in a meaningful way. Rate decisions are also expected in Australia and New Zealand, which are known as “barometers” for their developed market peers.
Geopolitical tensions also continue to rise as Russian forces face a new operational defeat, this time in a key town in eastern Ukraine. This puts more doubt on President Vladimir Putin’s promise that four occupied regions will be his “forever.” President Joe Biden said that a huge leak from the Nord Stream gas pipeline system in the Baltic Sea was done on purpose.
This week’s major events:
- Monday was Eurozone manufacturing PMI day.
- US spending on construction, ISM Manufacturing, sales of small cars, Monday
- Raphael Bostic and John Williams of the Fed give speeches at events. Monday
- The finance ministers of the Eurozone and the EU meeting. Monday Eurozone PPI, Tuesday, orders from US factories for durable goods, On Tuesday, John Williams, Lorie Logan, Loretta Mester, and Mary Daly all speak at events.
- The OPEC+ meeting begins. On Wednesday, Raphael Bostic from the Fed speaks. Wednesday Retail sales in the eurozone on Thursday, the first jobless claims in the US were On Thursday, Charles Evans, Lisa Cook, and Loretta Mester from the Federal Reserve spoke at events. Thursday
- US unemployment, wholesale inventories, jobs outside of farming, and Friday
- BOE Deputy Governor Dave Ramsden speaks at an event Friday.
- John Williams of the Fed speaks at an event Friday.
- Key market movements
S&P 500 futures were down 0.1% at 12:25 p.m. Tokyo time. On Friday, the S&P 500 fell 1.5%.
Nasdaq 100 futures dropped 0.4%. The Nasdaq 100 Index slid 1.7% on Friday.
The Topix index in Japan went up 0.3%.
Hong Kong’s Hang Seng Index was down 1.2%.
The S&P/ASX 200 Index fell 0.1%.
Futures for the Euro Stoxx 50 fell the Euro Stoxx 5
The Bloomberg Dollar Spot Index is down 0.1%.
The euro rose 0.1% to $0.9812 per euro.
The British pound fell 0.4% against the dollar, to 1.1127.
At 144.82 yen per dollar, there wasn’t much change in the value of the yen.
The offshore yuan went up by 0.1%, to 7.1363 dollars per 7.1363 dollars per
Bitcoin fell 0.4% to $19,163.
Ether fell 0.9% and was worth $1,291 in bonds.
The 10-year Treasury yield fell by nearly 5 basis points to 3.78 percent.
The West Texas Intermediate went up 2.8% to $81.72 a barrel.
Gold went up 0.2% to $1,664.22 an ounce.
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