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Dollar continues to rise, tracking bond yields higher
he dollar continued to surge against all major cross-rates, with the dollar index hitting a year-to-date high. Bond yields continued their seemingly relentless climb to new decade highs. Fixed income markets seem more concerned than equities about the Fed’s recent "higher for longer" interest rate strategy and fears of a US government shutdown. The broadly based Russell 2000 was the equity market leader at midday. Bottom-line: risk-on.
Chinese equity markets and yuan hold firm on no change in rates
China’s central bank kept its benchmark lending rates unchanged this week, walking a fine line between supporting the domestic property sector and consumption while not undermining the yuan. China’s main stock markets rallied on Friday on bargain hunting, to end level on the week, somewhat surprising given no signs of improvement in the key property sector.
Bonds could trump data next week if yields keep surging: The Week Ahead
The most notable reaction following the latest FOMC meeting was the reaction of bond markets, which continued to plunge and send yields higher. Not even the US dollar could extend its rally meaningfully despite the rise of yields. But global stock markets certainly took notice and fell in tandem as investors finally took the Fed seriously that interest rates are likely to remain higher for longer. So whilst we have US PCE inflation, consumer sentiment, GDP, retail sales and the likes of China PMIs and Australian CPI, it is likely to be how bond yields behave next week as to how important these economic data points become.
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Nasdaq rallies on lower bond yields in see-saw markets
Markets rallied after sell-offs this week, led by Nasdaq. Bond markets steadied, with yields backing off highs. This reversed prior moves this week. After focusing on the Fed and interest rates this week, traders are starting to think about the impact of a Government shutdown next week and an escalating Auto workers strike. Commodities saw buying in oil, as did precious metals and the ag complex. Bottom-line: risk-on.
Problems with the Magnificent Seven Stocks
Vincent Deluard, StoneX global macro strategist, asks: are we at an inflexion point, when higher bond yields and a steeper yield curve could hit the rating of expensive growth stocks? The Magnificent Seven (Mag7) stocks have become synonymous with this bull market: Amazon, Alphabet, Apple, Nvidia, Meta, Microsoft and Tesla. These stocks make up a quarter of the S&P 500 market value.
USD/JPY: playing the range as BOJ invention threat counteracts fundamentals
Should the Japanese government order the Bank of Japan to intervene in FX markets, it deserves the savage USD/JPY bounce that will almost inevitably be coming its way.
Nasdaq tumbles on higher bond yields
Nasdaq continued to lead markets down this morning as traders digested a pessimistic assessment of the Fed’s statement yesterday. Jobs data continues to demonstrate that the economy is not slowing. 10-year bond yields spiked to almost 4.5%, rates last seen in 2006, and putting a strain on the valuation of equity markets. Bottom-line: risk-off.
Gold should be getting hammered but isn’t - that’s interesting
If gold can’t weaken substantially in these conditions, when will it? And what happens when the tide eventually turns, with the US dollar and bond yields turning lower?
Fed pauses rates, but Nasdaq fell on fears that interest rates will still rise
Nasdaq fell sharply on news that while the Fed will pause rates for now, higher rates are possible. Higher bond yields and the risk of another rate hike this year caused a sell-off in equities and bonds. Oil saw profit-taking. The dollar index rallied on hopes that US rates will rise further. Bottom-line: risk-off.
Bitcoin leadership and record high bond yields ahead of Fed’s rate decision
Nasdaq, the R&P 500 and Russell 2000 equity indices were off marginally as markets braced for tomorrow’s Fed interest rate decision. Bitcoin rose 1.2% to $27,177, continuing a recent rally. Ten year bond yields rose to 4.37%, a rate last seen in June 2008. Oil and the dollar, recently strong markets, were unchanged, as were Gold and Silver. Bottom-line: risk-off.
USDBRL should reflect interest rate decisions in Brazil, the United States, England and Japan
Bullish factors The Federal Reserve is expected to take a firm stance against inflation and release its projections of interest rates higher than the median of market estimates, reinforcing the perception that interest rates will stay higher for longer in the US and strengthening the dollar. The Monetary Policy Committee should reduce the basic interest rate (Selic) by 0.50 p.p., reducing the country's interest differential to other economies and reducing the inflow of investments into the country, weakening the BRL. Bearish factors The Bank of England is expected to raise interest rates even in the face of economic stagnation in the country, increasing concerns about an economic slowdown in Europe and strengthening the dollar. The Bank of Japan is expected to maintain its ultra-loose monetary policy unchanged, contributing to the strengthening of the dollar by contrast.
S&P 500 stalled ahead of Fed meeting, Oil price hits 2-year high
Higher oil prices continue to be the headline in financial markets, hitting 2-year highs and briefly surpassing $92 per barrel. Nasdaq and the S&P 500 struggled to find direction ahead of the Federal Open Market Committee September meeting today and tomorrow. No one expects another rate hike. Treasury markets saw yields rising, with 10-year yields close to their highest levels in 16 years at 4.32%. The US dollar index paused after a recent run. Bottom-line: risk-hold.
Gold remains range-bound
In the short-term gold remains range-bound, and after finding support in mid-July on its dip below $1,900 (some of which was believed to be institutional and some from the official sector), has traded between $1,900 and $1,950. For the time being we can probably expect it to stay in that range as there is plenty of resistance on the charts above $1,950 and the professional markets, at least, are not prepared to commit themselves until the Fed’s and European Central Bank’s interest rate policies become crystallised.
China showing signs of recovery, Yuan rallies
Global attention is focused on Chinese economic data and financial market conditions after weakness in the first half of the year, with a troubled property sector, and official action to cautiously lower interest rates and increase domestic bank liquidity. Generally, the flow of economic data was more positive than expected last week with signs of economic momentum gathering –better-than-expected retail sales, stronger loan demand and signs that inflation is rising. The Central Bank is still fine-tuning monetary policy to promote that growth and offset property-sector weakness while trying to avoid a sharp sell-off in the Yuan, and last week showed some signs that this is working.
Nasdaq leads equity drop, oil and dollar remain strong
Major indexes extended losses after mid-day, dragged down by tech majors in Nasdaq. Oil and the US dollar built on recent gains, with the former rising to $90.7 per barrel and the latter holding the 105.3 dollar index level. US consumer sentiment is finally eroding, signaling the lagged impact of higher rates. On the other hand, China’s retail data was surprisingly strong, prompting a rally in the yuan. US manufacturing data was surprisingly strong. Bottom-line: risk-off.
Russell 2000, Oil and the Dollar lead markets
The Fed will keep one eye on events and one on economic data. Recent inflation and demand data have been pretty benign despite the rising oil price. Risks of a budget fall-out and government shutdown coupled with a US auto workers strike might tend to make the Fed more dovish and not look to raise rates next week. The ECB hinted that today’s rate rise might be its last. The broad Russell 2000 index led markets higher and the Vix fear index fell to a year-to-date low. The Dolla was strong, and the Euro continued its swoon. Oil passed the $90 mark. Bottom-line: risk-on.
USD/CNH: Turning point as yuan strengthens despite US core CPI strength?
USD/CNH has broken out of the range it’s been in since July, signaling a potential period of consolidation, or even a reversal, from the prevailing bullish trend.
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Nasdaq bounces back on inflation data
Mixed results in this morning's inflation data fed hopes of a rate hike pause on Wall Street, leading to cautiously firm stocks at midday, led by Nasdaq. Bond yields fell back after sharp increases on a first read of the inflation data. Futures markets put close to zero probability on a rate rise next week. Elsewhere currency and commodity markets were pretty much unchanged. Crude oil moved up to a 10-month high. Bottom-line: risk-on.
Lithium sector’s big test as bond yields threaten to break higher
Containing upstream producers through to auto manufacturers such as Tesla, the Global X LIT ETF can be used to track sentiment towards the lithium sector.
Nasdaq dips, Oil hits new highs
Tech stocks gave up recent gains on disappointing news from Oracle, with Nasdaq ending a 3-day recovery. Many commentators point to the high valuation of many tech leaders. Oil prices were today’s stand out, approaching a 12-month high. The dollar continued to strengthen, notably against the Japanese yen and Chinses yuan. Data from service sector reported strong growth and higher prices – bad news for inflation. Bottom-line: risk-off.
Gold price pausing for breath
Gold is pausing for breath between $1,925 and $1,950. All eyes are on the Fed, and interest rate policy. While the labor market is tightening slightly, it’s broadly steady on balance over the longer term. Silver is tracking gold, and the ratio is holding steady. Elsewhere, economic news is weak: European PMIs were disappointing again, and there was more bad news from China, with continuing support for the yuan. For now, bullion markets are cautious and, barring any exogenous shocks, we can probably look for prices to drift in the near term ahead of next week’s Fed meeting.
USDBRL expected to reflect inflation in Brazil and the US, ECB decision and Chinese data
Bullish factors August CPI in the US is expected to accelerate moderately, reinforcing the perception that the Federal Reserve will maintain a firmer stance on inflation and sustain higher interest rates for longer, strengthening the dollar. Economic data in China and Europe are expected to suggest a slowdown in these economies and could dampen foreign investors' risk appetite, weakening the real. Bearish factors August IPCA in Brazil should increase moderately, suggesting that the space for interest rate cuts by the Central Bank may be lower than initially estimated and lower expectations for the fall in the interest differential across the country, contributing to the attraction of financial investments and strengthening the real.
Nasdaq, S&P rally, Oil prices maintain highs
This week’s inflation report is centerstage, with the Nasdaq and S&P 500 rallying on the belief that the report will be benign and the Fed won’t raise interest rates next week. The oil price is hovering around $88 as we await new data on the supply/demand balance. September 11 – 9-11; May the memory linger and may we never forget. This is a somber day in American history as it struck at the heart of Wall Street. Bottom-line: risk-on.