BNN Bloomberg's mid-morning market update: Oct. 02, 2023
The global bond selloff resumed on Monday, with 10-year Treasury yields approaching recent highs, as investors waited for a speech by U.S. Federal Reserve chief Jerome Powell to provide clues on the direction of interest rates.
Treasury 10-year yields rose around basis points to 4.64 per cent, while the S&P 500 pointed lower after Tesla Inc. reported third quarter deliveries and production that missed estimates. The electric-vehicle maker’s shares fell 1.4 per cent. Lawmakers’ deal over the weekend to avoid a government shutdown did little to bolster equities as the focus in markets quickly shifted back to interest rates, especially as rising oil prices threaten to fan inflation.
Oil futures edged higher, adding to the previous quarter’s 30 per cent advance, as traders placed bets that global demand will continue to run ahead of supply.
Powell is due to speak at a roundtable discussion alongside Philadelphia Fed President Patrick Harker. Their views will be of particular interest after New York Fed boss John Williams suggested Friday interest rates should stay high for some time.
“Financial markets were bracing for a shutdown, so there’s an element of relief, but it’s only a temporary lifting of one of the clouds hanging over the markets now,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “Interest rates and Fed hawkishness remain the name of the game and the main driver of the markets over the next few weeks.”
The selloff in global bonds has gathered momentum as the US shutdown reprieve prompted traders to raise bets on a November rate hike from the Fed. They now see a roughly one-in-three chance of a November move, up from the 25 per cent likelihood priced on Friday.
The dollar edged higher versus its Group-of-10 peers, after enjoying its best quarter in a year. Against the yen, it briefly touched a year-to-date high of 149.82, after the Bank of Japan said it would conduct an additional buying operation. Gold prices slipped to seven-month lows, extending last week’s four per cent slide, under pressure from surging bond yields.
Key events this week:
- China has week-long holiday
- Bank of England policy maker Catherine Mann speaks on monetary policy, Monday
- Fed Chair Jerome Powell and Philadelphia Fed President Patrick Harker participate in a roundtable discussion, Monday
- New York Fed President John Williams moderates discussion on climate risk, Monday
- Cleveland Fed President Loretta Mester speaks on economic outlook, Monday
- U.S. ISM manufacturing index, Monday
- Australia rate decision, Tuesday
- Atlanta Fed President Raphael Bostic speaks on economic outlook and inflation, Tuesday
- August U.S. JOLTS report, Tuesday
- Eurozone services and composite PMIs, Wednesday
- ECB President Christine Lagarde gives welcome address at conference, Wednesday
- U.S. ISM services index, Wednesday
- France industrial production, Thursday
- BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
- San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
- Germany factory orders, Friday
- September U.S. nonfarm payrolls, Friday
Some of the main moves in markets:
- The S&P 500 fell 0.2 per cent as of 9:30 a.m. New York time
- The Nasdaq 100 was little changed
- The Dow Jones Industrial Average fell 0.3 per cent
- The Stoxx Europe 600 fell 0.6 per cent
- The MSCI World index fell 0.4 per cent
- The Bloomberg Dollar Spot Index rose 0.4 per cent
- The euro fell 0.5 per cent to US$1.0524
- The British pound fell 0.5 per cent to $1.2141
- The Japanese yen fell 0.3 per cent to 149.79 per dollar
- Bitcoin rose 4.5 per cent to $28,328.83
- Ether rose 3 per cent to $1,724.77
- The yield on 10-year Treasuries advanced six basis points to 4.64 per cent
- Germany’s 10-year yield advanced four basis points to 2.87 per cent
- Britain’s 10-year yield advanced five basis points to 4.49 per cent
- West Texas Intermediate crude rose 0.3 per cent to $91.02 a barrel
- Gold futures fell 0.8 per cent to $1,851.80 an ounce
This story was produced with the assistance of Bloomberg Automation.