Morning Show: Dollar shines amid broad market gloom

A chart of the German DAX stock price index is photographed at the Frankfurt Stock Exchange, Germany, on September 27, 2023. REUTERS PHOTO/STAFF/FILE Obtaining licensing rights

A look at the day ahead in European and global markets from Tom Westbrook

German and Spanish inflation data and European consumer confidence data due today appear unlikely to overcome the gloom that has clouded the markets in recent days.

The rise in oil prices to their highest levels in a year led to increased selling in the bond market and a strengthening of the dollar, while global stocks fell for nine consecutive sessions. The dollar stands at a 10-month high against a basket of other major currencies, and 10-year Treasury yields are hovering at 16-year highs.

Various lawmakers on Capitol Hill have the United States just days away from the fourth partial government shutdown in a decade, which could prompt Moody’s to respond to the ratings.

The Republican presidential candidates’ debate on Wednesday yielded no breakthrough that could turn around a race that Donald Trump has dominated for months.

China is headed for a week-long holiday from today, with the yuan weakening, shares in developer Evergrande (3333.HK) suspended again, industrial profits falling, and a record number of Chinese planning to avoid traveling abroad over the holiday period.

Evergrande, the world’s most indebted real estate developer, with liabilities totaling more than $300 billion, is at the heart of an unprecedented liquidity crisis in China’s real estate sector, which accounts for nearly a quarter of the economy.

Stocks fell in Asia on Thursday, with the Nikkei (.N225) falling nearly 2% as a number of companies in Japan went without profits. Rising US bond yields have seen the two-year US-Japanese bond spread above 500 basis points and the USD/JPY approaching 150 basis points.

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There is still no intervention from Japan, although the moves in this pair are so temporary that traders are clearly nervous.

In addition to today’s data, Fed Chairman Jerome Powell’s comments will be the focus of markets when he speaks at 2000 GMT.

Reuters graphics

Key developments that may impact markets on Thursday:

– CPI inflation in Germany (September, preliminary)

– Confidence survey in the euro area

– Federal Reserve Chairman Jerome Powell speaks

Tom Westbrook reports. Edited by Edmund Claman

Our standards: Thomson Reuters Trust Principles.

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