Big day! With the support of the Fed's dovish rate hikes, global stock markets are expected to record their largest weekly gain in a year on Friday (November 3) as investors are pleased with the US pause in rate hikes, while the US dollar is on the defensive. But Friday trading was relatively sluggish as investors waited for key US non farm employment data to be released later today.
Huitong Finance APP News - Big Day! With the support of the Fed's dovish rate hikes, global stock markets are expected to record their largest weekly gain in a year on Friday (November 3) as investors are pleased with the US pause in rate hikes, while the US dollar is on the defensive. But Friday trading was relatively sluggish as investors waited for key US non farm employment data to be released later today.
Apple's performance dragged down US stock futures
The Morgan Stanley Capital International Global Stock Index has risen 4.3% since Monday, which will be the largest weekly gain since November 2022. The index rose 0.23% on the same day.
European stocks rose slightly as traders awaited the release of US employment data later Friday, which will test optimism about whether the Federal Reserve's tightening cycle is about to end.
The Stoxx 600 index rose about 0.2%, with a weekly increase expected to be 3.4%, and is set to record its largest gain since March. The German DAX index rose 0.18%, while the UK FTSE 100 index gained the same amount.
Automakers performed the best, with BMW's stock price rising and all electric vehicle sales increasing, improving profit margins. Maersk Group, the leader of global trade, fell more than 7% after the company announced it would lay off at least 10000 employees to protect its profitability.
US stock futures fell, with the S&P 500 index futures falling 0.2% on Friday, indicating a slight decline in opening hours, after the index rose 1.9% the day before. Apple's announcement of its Greater China financial report disappointed investors, and its stock price fell in pre market trading.
The sentiment in the Asian market is relatively optimistic, with the MSCI regional benchmark index rising by more than 1%, setting its best weekly performance in two months.
The Bank of England and the United States is standing still
As the stock market rose, bond yields plummeted, after the Federal Reserve held interest rates unchanged at its second interest rate meeting on Wednesday and the Bank of England announced on Thursday that they would remain unchanged.
Central bank officials emphasize that more measures may be needed to address inflation, but many investors believe that the next trend in borrowing costs may be a decline.
Solita Marcelli, chief investment officer of UBS Global Wealth Management Co., Ltd. in the Americas, said that UBS expected that the yield of 10-year US treasury bond bonds would fall to 3.5% by June next year as the Federal Reserve shifted its attention from raising interest rates to cutting interest rates. She said, "The improvement in the prospects for a soft landing in the US economy should also provide a positive background for the stock market
Others hold a more cautious view. Hedge fund K2 Asset Management Company predicted that the benchmark 10-year US treasury bond bond yield would rise from 4.66% to 5%, while Franklin Templeton said that the 10-year treasury bond bond yield might peak at 5.25%, the highest level in 2007. Stephen Dainton, co head of global markets at Barclays Bank, stated that the Federal Reserve is "very unlikely" to end its tightening policies.
In the past week, you've basically heard from all the major central banks... in their view, I think they're all watching, "said Samuel Zief, head of global foreign exchange strategy at JPMorgan Chase Private Bank. The European Central Bank kept interest rates unchanged last week.
Once the market is convinced that all these central banks are standing still... this may push bond yields lower
Non agricultural heavyweight strikes
Market attention is shifting towards the release of US non farm employment data later today to further determine the Fed's interest rate path. Bloomberg Economics predicts that the recruitment rate will slow to less than half of the strong growth in September.
The market is betting that the central bank's interest rate hike has ended, inflation is declining, and corporate profits are strong - now they only need to clear one more obstacle to complete what is destined to be the best week of 2023.
The October employment report for the United States will be released later today, putting an end to two weeks of complex and disruptive events such as central bank decisions, the latest corporate developments, and unsettling geopolitical concerns. As the first major indicator of the US economic strength in the last quarter of this year, the employment report is crucial, despite the expected distortion of strike related data.
The US employment report for October will be released at 20:30 Hong Kong time on Friday evening. Economists predict that after a significant increase of 336000 jobs in September, the US economy will add 180000 jobs in October.
Goldman Sachs Chief Economist Jan Hatzius wrote in a report to clients that the bank expects an increase of 195000 jobs, despite the auto workers' strike dragging down 30000.
He said, "We believe that a tight labor market will motivate companies to recruit early in the fall and before holidays
Earlier this week, the employment data in the private sector was weak, and the number of initial jobless claims per week slightly increased. Employment growth is expected to slow down from 336000 in September to about 180000.
Given the sharp rise in the stock and bond markets on Thursday, mainly based on the assumption that the Federal Reserve, European Central Bank, and Bank of England have ended interest rate hikes, signs of a cooling labor market may be welcome.
The decline in employment data may indicate a relaxation of the labor environment, which tends to weaken faster than tighten, "said an analyst at Rand Merchant Bank in Johannesburg." This may also challenge the Fed's view of maintaining high interest rates for a longer period of time
The yield of 10-year US treasury bond bonds, as a reference for global borrowing rates, fell by 20 basis points on Wednesday and Thursday, and has fallen by about 36 basis points since hitting a 16 year high of more than 5% last week.
On Friday, the yield of treasury bond bonds, which is opposite to the price trend, remained unchanged at 4.666%.
The US Treasury Department's decision on Wednesday to issue lower than expected long-term government bonds, as well as Thursday's data suggesting that the US economy may finally begin to cool, also boosted the rally in government bonds.
Data released before the non farm employment report showed that labor productivity in the United States had the largest increase in three years, which helped alleviate the impact of recent wage growth on inflation.
The US dollar index fell for the third consecutive trading day, falling 0.16% on Friday to 106.03. Dragged by the yield of US treasury bond bonds, it will fall 0.49% this week, which is bound to be the biggest weekly decline since mid July.
Due to the ongoing control of the war between Israel and Hamas, as well as cloudy demand, oil prices are expected to decline for the second consecutive week. Brent crude oil futures have fallen 3.8% since Monday to $87.04 per barrel, while US crude oil futures are trading at $82.67 per barrel, although both have slightly increased on Friday.
Gold prices may experience their first decline in four weeks and are currently trading around $1990, waiting for further catalysts.
Matt Simpson, a senior analyst at City Index, said that the employment report needs to provide some unexpectedly weak data in order to further suppress US bond yields and push gold prices above the $2000 per ounce level.
