The yields of government bonds continue to update the maximums. RBNZ left the rate unchanged

October 4, 2023

At yesterday’s stock market close, the Dow Jones Index (US30) was down by 1.29%, while the S&P 500 Index (US500) decreased by 1.37%. The NASDAQ Technology Index (US100) closed negative by 1.87% on Tuesday. The S&P 500 (US500) and Dow Jones Industrials (US30) indices fell to 4-month lows as the dollar index and government bond yields surged to 16-year highs. Hawkish comments from Fed Chair Cleveland Mester and Atlanta Fed Chair Bostic pushed 10-year T-note yields to a 16-year high as they voiced their support for keeping interest rates higher. Economic data on the labor market also supported the dollar. The US job openings rose by 690,000 from the previous month to 9.61 million in August, well above the market’s consensus forecast of 8.80 million and indicating a robust labor market. Investors fear that the Fed will raise the rate once again this year (the probability is already over 40%).

JPMorgan Asset Management warned that there is a risk of further stock market declines due to rising interest rates, “We didn’t expect this rate hike. This is something that will at least slow or even reverse the progress of stock markets.” Airbnb (ABNB) stock prices fell more than 6% and topped the list of losers on the Nasdaq 100 index after KeyBanc Capital Markets downgraded the company’s stock to sector Perform from Outperform. Goldman Sachs (GS) was down more than 3% and topped the list of losers in the Dow Jones Industrials after Morgan Stanley cut its target price on the stock to $329 from $347.

Prospects for a reduction in global fuel supplies are lending support to oil. Late last month, Russia announced a ban on gasoline and diesel exports in an attempt to stabilize domestic fuel prices. The ban will reduce fuel supplies by about 1 million BPD, about 3.4% of total global demand. The OPEC+ country will meet today. No surprises are expected – the countries are forecast to continue their previously planned cuts.

Asian markets were mostly declining yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.64% on Tuesday, China’s FTSE China A50 (CHA50) will not trade for the rest of the week due to holidays, Hong Kong’s Hang Seng (HK50) was down by 2.69% on Tuesday, and Australia’s ASX 200 (AU200) was negative 1.28%.

The Reserve Bank of New Zealand (RBNZ) left the interest rate unchanged at 5.5% and expressed a relatively soft stance on the future trajectory of the OCR in an accompanying statement. Key factors determining the likelihood and size of a November tightening will be third-quarter inflation data due on October 17 and labor market data on November 1.

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Japan’s finance ministry conducted another currency intervention yesterday to support the exchange rate, although there was no official statement from officials. A spokesman for Japan’s finance ministry was not available to comment on whether Japan had intervened against the yen. But analysts pointed to other explanations, such as standing orders to sell dollars at the 150 level because of the threat of official action. Others speculate that there may have been a check by Japanese authorities on exchange rates at banks, a move often seen as a prelude to further official action.

S&P 500 (F)(US500) 4,229.45 −58.94 (−1.37%)

Dow Jones (US30) 33,002.38 −430.97 (−1.29%)

DAX (DE40) 15,085.21 −162.00 (−1.06%)

FTSE 100 (UK100) 7,470.16 −40.56 (−0.54%)

USD Index 107.06 +0.16 (+0.15%)

News feed for 2023.10.03:

– Japan Services PMI (m/m) at 03:30 (GMT+3);
– New Zealand Interest Rate Decision at 04:00 (GMT+3);
– New Zealand RBNZ Rate Statement at 04:00 (GMT+3);
– Eurozone Services PMI (m/m) at 11:00 (GMT+3);
– Eurozone ECB President Lagarde Speaks (m/m) at 11:15 (GMT+3);
– UK Services PMI (m/m) at 11:30 (GMT+3);
– Eurozone Producer Price Index (m/m) at 12:00 (GMT+3);
– Eurozone Retail Sales (m/m) at 12:00 (GMT+3);
– OPEC+ meeting at 13:00 (GMT+3);
– US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
– US ISM Services PMI (m/m) at 17:00 (GMT+3);
– US FOMC Member Bowman Speaks (m/m) at 17:25 (GMT+3);
– US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
– Eurozone ECB President Lagarde Speaks (m/m) at 19:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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The yields of government bonds continue to update the maximums. RBNZ left the rate unchanged