News & Analysis

U.S stocks weaken – Europe shakes off Italy concerns to close higher; Oil gains struggles at $75; Risk finds feet to USD

Oct 9, 2018 | Market Updates

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19:30 GBP GDP – Manufacturing Production
23:30 USD PPI

Rates continued to worry U.S traders overnight, the S&P500 lost 4.09 pts to finish lower for a fourth day in a row. The Dow Jones closed 56.21 pts lower. The Nasdaq snapped a 3-day losing streak adding 2.07. Facebook, Amazon, Netflix and Apple gained supporting the index. Trading was uncertain as price moved from positive to negative throughout the session. The benchmark 10-year Treasury note yield rose to its highest level since 2011, before slipping. The longer-term 30-year bond yield also reached its highest mark since 2014.

“This has led to a repricing of forward Fed hike expectations,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “The recent hawkish comments from Powell, as well as the questioning over where the market neutral rate actually is, has led to a bearish tone overall.” “It seems clear that the ‘burden of proof’ is on the data, and each release will have to be interpreted by investors as either affirming the Feds charted path, or not,” said Nixon. “This will mean more volatility in the bond market.”

Yields continue to unsettle traders and investors, higher rates and expectations of tighter monetary policy are a drag on stock markets, given that they cap companies’ profits, thus restricting possible dividends to investors and higher pay for the employees. – CNBC

European stocks gained, despite ongoing tensions between Italy and the European Union (EU) over Rome’s budget spending plans. The DAX added 30.06 the FTSE gained 4.26. Basic Resources and Technology stocks led the charge higher in Europe, the latter sector taking its cue from a rebound on Wall Street. Tensions continue to grow between Italy and the EU over Rome’s 2019 budget and deficit targets. Britain’s Sage tumbled towards the bottom of the index on Tuesday, after Barclays slashed its stock recommendation to “underweight” from “equal weight.”

Oil rallied on Tuesday supported by growing evidence of falling crude exports from Iran before the imposition of new U.S. sanctions and a partial shutdown in the Gulf of Mexico due to Hurricane Michael. USOUSD snapped a3-day losing streak closing 40 cents higher. Price struggled for the second time at $75. Sellers mounted an offensive once this level was crossed sending price closing lower. If we’re going to see a bullish continuation we would like to see a close above $75.

Gold finished mainly unchanged adding $1.14 in a choppy session. Sellers took price $5 lower at one stage and buyers held a 2.50 rally before price settled at 1189.41. The USD held momentum into the London session sending risk majors lower before a fightback began, the GBP and EUR closed higher after trading lower into the NY session. The AUD tested it’s open before regaining demand to finish 25 pips higher. The Yen was mixed finishing lower to the GBP and AUD but advancing to the USD and EUR. This morning risk is making gains to the USD and JPY. The ASX200 horror week continues with price again in the red this morning. The AUS200 down 102 pts so far.

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Sources; CNBC – All times are AEST

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