An overview of the global market

Market Volatility and Central Bank Actions Amid Rising Bond Yields

On Wednesday, Asia-Pacific markets experienced widespread weakness, with Korean and Japanese stocks both declining by over 2% following a 16-year high in the U.S. 10-year Treasury yield. The Japanese yen strengthened against the U.S. dollar, briefly reaching 150 overnight. When asked about potential intervention to support the yen, Japan's Finance Minister Shunichi Suzuki declined to comment but mentioned Japan's readiness to respond to significant currency movements.
Meanwhile, the Reserve Bank of New Zealand decided to keep its key interest rate at 5.5%. Despite stronger-than-expected GDP growth in the June quarter, the bank noted a subdued growth outlook for the country. New Zealand's GDP rose by 3.2% compared to the same period last year.
In the US, job openings increased to 9.61 million in August, up from less than 9 million the previous month, according to the Bureau of Labor Statistics. This report led swaps traders to raise their bets on the Federal Reserve raising rates in December to over a 50% probability.
Atlanta Fed President Raphael Bostic, who is not voting this year, emphasized the need to keep rates elevated for an extended period. He projected a single rate cut in 2024, likely towards the end of the year. These comments followed a series of hawkish statements from other Federal Reserve policymakers.
The global bond selloff persisted, with investors adapting to a new era of higher-for-longer interest rates. Yields continued to rise, with the 10-year Treasury yield reaching a fresh 16-year peak, and the benchmark 10-year Japanese government bond yield remained at a 10-year high. These developments contributed to a risk-averse and unsettled European session, as indicated by futures pointing to a lower market opening.
Global Financial Markets Respond to Jobs Data and Oil Price Drop

European equity futures followed the upward trend seen in Asian markets, as both stocks and bonds experienced gains on Wall Street. This provided some relief to financial markets that had recently endured a series of harsh losses. The rally in stocks and bonds came after weaker-than-expected jobs data led to a decrease in U.S. Treasury yields from their 16-year highs.
In September, U.S. companies added the fewest jobs since the beginning of 2021, as reported by a survey conducted by the ADP Research Institute in collaboration with the Stanford Digital Economy Lab. Another report from the Institute for Supply Management indicated a slight contraction in the services sector last month, marking the lowest level of the year. Forecasts for Friday's nonfarm payroll figures suggest a slowdown in hiring for September.
Additionally, there was a significant 5% drop in crude oil prices, which is noteworthy as it represents the largest drop in over a year, pushing oil prices below their levels from a year ago. This decline in oil prices has removed the inflationary pressures associated with oil. This shift in the macroeconomic outlook and concerns about reduced fuel demand gained prominence following a meeting of the OPEC+ panel, consisting of the Organization of the Petroleum Exporting Countries and its allies led by Russia.
During the OPEC+ ministerial panel meeting, no changes were made to the group's oil output policy. Saudi Arabia announced its commitment to maintaining a voluntary cut of 1 million barrels per day (bpd) until the end of 2023, while Russia pledged to continue a 300,000 bpd voluntary export curb until the end of December.
Market Insights: Asian Stocks Rise, European Markets Follow, and US Payrolls Report Looms

Asian stocks received support from gains in Hong Kong, where the Hang Seng Index surged by up to 2.3%. This surge was driven by optimism regarding southbound flows and Golden Week consumption trends, which are expected to benefit Chinese shares when mainland markets reopen. The main contributors to this rally were e-commerce and other consumer-related companies, along with financial stocks.
Meanwhile, European stocks edged higher, following the positive momentum in Asian markets. This uptick came as traders prepared for the release of the US payrolls report, which is anticipated to reveal a slowdown in hiring by employers last month. This potential slowdown could alleviate some of the pressure on the Federal Reserve to raise interest rates once again.
According to a Bloomberg survey, the nonfarm payrolls report is expected to indicate that US employers added 170,000 workers in the previous month, a decrease from the 187,000 added in August. Earlier in the week, job data presented a mixed picture: job openings exceeded expectations, but a measure of private employment from ADP fell short of forecasts.
San Francisco Fed President Mary Daly, who is not a voting member of the Fed's rate-setting committee this year, suggested that the central bank might maintain its current interest rates if both inflation and the job market show signs of cooling.
Middle East Geopolitical Turmoil Sparks Market Uncertainty and Oil Price Surge

European markets opened on a downturn on Monday, as investors evaluated the repercussions of recent Middle East geopolitical turmoil. This turmoil stemmed from a substantial attack by the Palestinian militant group Hamas on Israel over the weekend, resulting in hundreds of casualties. Consequently, oil prices surged by 4% overnight, while U.S. stock futures dipped early Monday. This escalation of violence introduced additional geopolitical risk to already fragile markets grappling with inflation and rising interest rates.
The Israeli-Palestinian conflict took a significant turn on Saturday when Hamas launched an unexpected invasion, catching Israel off guard. This sudden escalation in geopolitical tensions may lead to an immediate surge in oil prices, according to some experts. Additionally, it could contribute to further market volatility, which has been a cause for concern due to persistent inflation and elevated interest rates.
Despite the regional instability, analysts anticipate that its impact on financial markets will be short-lived. Notably, major stock indices in the Middle East, especially Israel's TA-35 stock index, experienced declines, with the latter witnessing its most substantial loss in over three years. However, it rebounded by 0.5% on Monday following a sharp 6.5% drop in the previous session.
Meanwhile, Metro Bank's shares saw a remarkable 20% increase as the UK lender secured a £925 million ($1.1 billion) financing package. This move involved Colombian financier Jaime Gilinski obtaining a controlling interest in the bank, offering much-needed relief to the institution after a tumultuous week.
In terms of upcoming events for the week, investors will closely monitor releases related to China's money supply and new yuan loans, speeches by central bank officials, and economic data releases from various countries.
The Palestinian-Israeli War Had a Significant Impact on Global Financial Markets, Causing Them to Experience Turbulence And Uncertainty

Yesterday, the macroeconomic calendar in the market remained calm. However, the statements made by Federal Reserve (Fed) authorities Logan, Barr, and Jefferson were carefully monitored. Fed official Logan's comments on the rising bond yields attracted significant attention. Logan pointed out that the increasing U.S. bond yields might facilitate the process of tightening monetary policy, potentially eliminating the need for additional interest rate hikes by the Fed. Furthermore, Logan emphasized the current high levels of inflation, underscoring the influence of a robust labor market on inflation dynamics. He suggested that to reach the Fed's 2% inflation target, it is compulsory to maintain a course of tightening policies.

On the other hand, on Saturday, Hamas forces launched a surprise attack from the Gaza Strip into southern Israel, resulting in over 700 Israeli casualties, predominantly civilians. Around 260 people attending a music festival near Gaza's northern border were killed by Hamas militants. In retaliation, approximately 400 Palestinians lost their lives in Israeli counterattacks. Israel reclaimed control of areas previously held by Hamas and recaptured numerous territories. A protracted military operation in Gaza, potentially lasting for months, is anticipated.

Following the rise in tension in the Middle East, oil prices rose by up to 5%, and gained some of last week's losses. With the war risk returning to the markets, the barrel price of WTI crude oil exceeded 86 dollars. The price of Brent crude oil increased by 4% and found buyers at $88.30. It is worth reminding that Brent and WTI lost value last week due to the slowdown in global growth and the expectation of higher interest rates. Additionally, the yellow metal (gold), reacting with an increase to the possible war news, regained last week's losses and closed Monday at 1961 levels per ounce.

Today, in the U.S., the NFIB small business optimism data will be followed. It should be remembered that the August data was at 91.3 with a monthly decrease of 0.6 points.
Markets Upbeat with Global Risk Appetite Recovery

Asian stock markets experienced an increase today, mirroring the positive trend in Wall Street. This was driven by a more dovish communication from Federal Reserve officials, which strengthened expectations that the central bank has finished raising interest rates. A softer U.S. dollar and lower Treasury yields also contributed to the positive sentiment.

In addition, there were growing expectations of further interest rate hikes following the previous Federal Reserve meeting. As a result, the yield on the 10-year US Treasury bond reached 4.88% last week, testing its highest level in 16 years. Subsequently, due to both the need for a haven prompted by the tensions in the Middle East and a more dovish stance from the Fed, it dropped by around 20 basis points to 4.63% yesterday. This morning, it has maintained a steady, flat trend.

In the economic calendar, today, we will be monitoring speeches by FOMC members. In the United States, we will also be keeping an eye on the PPI (Producer Price Index) and crude oil inventory data. The Federal Open Market Committee meeting minutes will be released.
Global Markets React to Economic Developments and Central Bank Policies

In the final hour of trading, Hong Kong stocks surged by nearly 2%, leading a broader rally in the Asia-Pacific region. This was driven by China's sovereign wealth fund purchasing shares of the country's largest banks, which boosted investor confidence. European stock markets also opened on a positive note, building on the strong global momentum seen earlier this week.
The focus has been on whether the US Federal Reserve is considering an end to interest rate hikes, especially after a series of dovish comments from officials. Despite the producer price index coming in hotter than expected, attention is now turning to the release of the consumer price index later today. Wednesday's publication of Fed minutes revealed that officials agreed last month to maintain a restrictive policy for some time while acknowledging the need to balance the risks of overtightening against the goal of curbing inflation.
European Central Bank officials have also emphasized that interest rates may have reached their peak. Bank of Portugal Governor Mario Centeno stated, "Unless unforeseen shocks occur, we believe our decision in September marks the end of rate adjustments." The ECB is set to release minutes from the September policy meeting today.
In other news, data released on Thursday morning indicated that the UK economy grew by 0.2% month-on-month in August, in line with economists' expectations. This follows the International Monetary Fund's projection of the weakest economic growth for the UK among all groups of 7 nations, with a forecast of 0.5% growth this year, compared to 0.7% in the Eurozone and 2.1% in the US.
Markets Upbeat with Global Risk Appetite Recovery

Global markets experienced a negative trend on the final trading day of the week due to developments in the Israel-Hamas conflict. Despite strong balance sheets, U.S. indices lost value, primarily due to increasing geopolitical risks. Major U.S. banks released their third-quarter financial reports, surpassing analyst expectations in terms of earnings per share and revenue.
Wells Fargo Company reported a 6.91% year-on-year increase in the third quarter of 2023, with earnings per share of $1.48 on revenue of $20.85 billion. The consensus expectation was for the company to announce earnings per share of $1.25 on revenue of $20.15 billion. Notably, the net profit exceeded expectations by 17.89%, reaching $5.45 billion. Also, Citigroup reported earnings of $1.63 per share on revenue of $20.1 billion. Consensus expectations were for the company to announce earnings per share of $1.22 on revenue of $19.24 billion. The net profit also exceeded expectations, showing a remarkable 40% increase to $3.50 billion.
On the macroeconomic front, consumer sentiment data published by Michigan for October came at 63, compared to an expected level of 67. Similarly, consumer expectations data was lower than anticipated, at 60.7 versus an expected 65.7. The one-year inflation forecast, which was expected to be 3.2% in line with previous data, was announced at 3.8%, while the five-year inflation forecast exceeded the 2.8% expectation, reaching 3%.
Today, in the United States, we'll also see the release of the Empire State Manufacturing Index and Budget Balance data. It's anticipated that the NY Fed index, which stood at -5.0 in October, will continue to decline. Regarding budget balance data, there's an expectation for a significant drop, potentially moving from $429.8 billion in August to a billion-dollar level. Additionally, the markets will be keeping a close eye on trade balance data in the Euro area.
Global Markets React to Economic Developments and Earnings Season
Shares in Asia-Pacific rose, led by South Korea's Kospi index, while Australian stocks advanced as investors analyzed minutes from the central bank's recent policy meeting. New Zealand's consumer inflation hit a two-year low in the third quarter, with a 5.6% increase in consumer prices from a year ago, slower than the 6% rise in the second quarter, but still above the central bank's target range of 1% to 3%. The Reserve Bank of Australia's minutes detailed why it maintained its benchmark lending rates at 4.1% during its October monetary policy meeting. Country Garden faces the risk of defaulting on its entire offshore debt if it fails to make a $15 million coupon payment when the 30-day grace period ends on Tuesday.​

In European markets, there was a slight retreat on Tuesday as corporate earnings season began, and investors continued to evaluate the situation in the Middle East. Major European companies like Ericsson, Rio Tinto, and Publicis are set to announce quarterly results on Tuesday, ahead of Wall Street giants Bank of America and Goldman Sachs reporting before the U.S. market opens. Philadelphia Federal Reserve President Patrick Harker acknowledged on Monday that the central bank's interest rate hikes have played a significant role in the surge in home prices. He reiterated his belief that the Fed doesn't need to raise rates again in this cycle and expressed a commitment to fighting inflation.
Global Economic Insights: Asian Stocks, Chinese Data, and Inflation Trends

Asian stocks declined despite a series of positive Chinese economic data, revealing ongoing fragility in sentiment. While growth and retail sales figures suggested the economy was gaining ground, the property market continued to be a drag.​

In September, China's retail sales surged, and the urban unemployment rate hit a near two-year low, according to Chinese government data. Additionally, China's third-quarter economic growth surpassed expectations, boosting hopes of reaching Beijing's annual targets for the world's second-largest economy.

However, Chinese property developer Country Garden Holdings expressed uncertainty about meeting its offshore debt obligations.

In Japan, the Bank of Japan unexpectedly initiated bond purchases after the nation's 10-year yield reached a ten-year high. This move followed renewed selling pressure on Japan's sovereign debt, fueled by speculation that the central bank might adjust its ultra-easy monetary policy sooner rather than later.

In European markets, Wednesday saw slight declines as traders monitored corporate earnings, Middle East developments, and crucial inflation data.

The U.K. experienced a 6.7% inflation rate in September, slightly exceeding expectations and remaining significantly above the Bank of England's 2% target. This highlighted the mounting inflationary pressures in the country and added complexity to the task of policymakers, who are expected to maintain unchanged interest rates at the upcoming meeting.

On the other side of the Atlantic, U.S. retail sales exceeded all forecasts, and industrial production strengthened last month. This provided fresh evidence of a robust American consumer whose spending is contributing to the stabilization of the manufacturing sector.