The USD hit 1-year highs again, and then cooled this week, as Yields held their bid, the Oil market continued to soar and US stock markets recovered following a strong start to the third quarter Earnings season.
The Market Week – October – Week 3
Yields remain the key driver of markets and the Greenback has dipped from highs as stock markets respond to a strong start to Q3 Earnings Season. Central banks remain on the hawkish side as inflation data suggest a “higher for longer” outcome. The Evergrande saga hangs over Asian markets and the energy crisis is far from over.
Still to come this week; Earnings from some key players including Tesla, AT&T, Intel & IBM, and a raft of Central Bank “speak”, inflation numbers and PMI data.
The number and quality of the US jobs recovery grinds on and remains central to the FED’s tapering timeframe. The weekly US unemployment claims last week registered a new pandemic low at 293,000 for the first time AND the long-term claims also improved significantly. Claims this week are expected to hold under 300,000.
The vaccine rollouts continue to drive sentiment, and the Delta variant remains a significant concern. In Asia lockdowns are beginning to ease and the vaccination rates continue to improve. However, as booster jabs roll out in high-income countries for the most vulnerable, low-income country vaccination rates remain very low.
The Greenback six-week bid cooled this week, the USDIndex rallied once again to 1-year highs at 94.50 before testing 93.50. EURUSD rallied from 1.1525 to 1.1660 highs, USDJPY hit 4-year highs at 114.70 as the underperforming Yen weakened and Cable held its bid (topping at 1.3830) on anticipation of a rate hike from the BoE before year end.
The US stock markets recovered significantly, supported by a cooler USD and strong earnings from across the banking sector. All three indices breached their 50-day moving averages and are within 0.5% of new all-time highs. This week the USA500 broke back over 4,500, the USA100 has recouped 15,000 and the USA30 is trading well above 35,000 at 35,400.
Gold remains rather rangebound, pressured from higher yields and a stronger USD but in demand as a hedge for rising inflation fears. This week a spike to the psychological $1800 was soon reversed and the precious metal again tested key support at $1760, before recovering to 50-day moving average at $1775.
USOil prices continued to soar, (yet again) printing new 7-year highs as demand outstrips supply, inventories continue to be drawn down and OPEC keeps production in check. This week the price peaked at $83.70 before declining under the key $81.00 per barrel.
The yield on the US 10-Year Treasury Note remains very much in focus and a key market mover. A significant rally to 1.6620% keeps rates elevated in the short-term and targets the March high at 1.72%. A more hawkish FED, and rising inflation, still suggest the taper timeframe will commence in November and run at $15bn per month until next summer.
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Stuart Cowell
Head Market Analyst
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