The Bank of Japan is once again adopting a more dovish bias. The Reserve Bank of Australia is preparing to raise the rate

By JustMarkets

At Friday’s close, the Dow Jones Index (US30) added 0.66% (+4.68% for the week), while the S&P 500 Index (US500) was up by 0.94% (+5.29% for the week). The NASDAQ Technology Index (US100) closed positive by 1.38% (+5.71% for the week) on Friday. All three indices closed in positive territory and hit their monthly highs. A weak US unemployment report supported speculation after Wednesday’s FOMC meeting that the Fed’s rate hiking regime is over.

The US unemployment report released on Friday showed weaker-than-expected labor market dynamics. The US employment number for October rose by 150,000, which was weaker than expectations of 180,000. In addition, the September data was revised downward to 297,000 from 336,000. October’s US unemployment rate rose by 0.1 points to a nearly 2-year high of 3.9%, indicating a slight weakening of the labor market versus expectations of an unchanged 3.8%. A positive for inflation was the 0.2% m/m increase in average hourly earnings in October, which was slightly weaker than expectations of 0.3%.

Friday’s ISM Services Business Activity Index for October fell by 1.8 points to 51.8, which was weaker than expectations of a decline to 53.0. At the same time, the final October S&P US services PMI was revised downward. The PMI reports indicate some slowdown in the US services sector.

Equity markets in Europe traded without any unified dynamics on Friday. The German DAX (DE40) rose by 0.30% (+2.83% for the week), the French CAC 40 (FR40) fell by 0.19% (+3.23% for the week) on Friday, the Spanish IBEX 35 (ES35) rose by 0.36% (+3.78% for the week), the British FTSE 100 (UK100) closed negative by 0.39% (+1.73% for the week).

The Eurozone unemployment rate for September rose by 0.1 points to 6.5%, indicating a slightly weaker labor market compared to expectations of an unchanged unemployment rate of 6.4%. Germany’s trade report showed weakness in the economy, with exports for September down by 2.4% m/m and imports down by 1.7% m/m, weaker than expectations of 2.0% and 0.1%, respectively.

Tensions continue to rise not only in the Middle East but globally as the conflict between Israel and the Gaza Strip continues to intensify. As each side continues to call on their potential allies, the likelihood of a larger conflict could increase. If this happens, we could begin to see sell-offs in stock markets and rising oil and gold prices.

Asian markets were predominantly up last week. Japan’s Nikkei 225 (JP225) gained 4.02% for the week, China’s FTSE China A50 (CHA50) added 1.35% over five trading days, Hong Kong’s Hang Seng (HK50) ended the week up by 2.55%, and Australia’s ASX 200 (AU200) ended the week positive by 3.12%. Most Asian indices rose sharply on Monday as weaker-than-expected US jobs data reinforced expectations that the Federal Reserve has ended its rate hike cycle, while attention also shifted to upcoming economic data from China.

The Reserve Bank of Australia is preparing to raise interest rates at its meeting on Tuesday, following signs of renewed inflation and some hawkish comments from central bank officials. The RBA is expected to raise its target money rate by 25 basis points to 4.35% as stronger-than-expected third-quarter inflation data released in October prompted a number of analysts to adjust their expectations. Australian banks ANZ and Westpac pushed back their November rate hike forecasts from December, while UBS and ING also expect a rate hike at the RBA’s November 7 meeting.

Bank of Japan Governor Ueda said on Monday that the central bank needs to have more confidence that wages will continue to rise (rising wages lead to higher prices for services, which will fuel inflation), and as the economy remains strong, it is premature to think about an exit from accommodative policy.

S&P 500 (F)(US500) 4,358.34 +40.56 (+0.94%)

Dow Jones (US30) 34,061.32 +222.24 (+0.66%)

DAX (DE40)  15,189.25 +45.65 (+0.30%)

FTSE 100 (UK100) 7,417.73 −28.80 (−0.39%)

USD Index  105.07 +0.05 (+0.05%)

• – Japan Monetary Policy Meeting Minutes at 01:50 (GMT+2);
• – Japan Services PMI (m/m) at 02:30 (GMT+2);
• – Japan BOJ Gov Ueda Speaks at 06:10 (GMT+2);
• – German Services PMI (m/m) at 10:55 (GMT+2);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
• – UK Construction PMI (m/m) at 11:30 (GMT+2);
• – Canada Ivey PMI (m/m) at 17:00 (GMT+2).

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.