Global stock markets were on the decline, with the three US benchmark averages all finishing lower for the week, as risk-off prevailed amid geopolitical tensions. Investors sought haven assets, typically in gold and the US dollar, while dumping riskier holdings, such as equities and commodity currencies. Crude oil prices climbed for the second straight week in the wake of the Hamas-Israel war, worsening global inflation outlooks. And the Fed Chair Powell signalled more rate hikes on cards, sending the US 10-year government bond yield hitting 5% for the first time since 2007, adding additional pressure to the stock markets and Asian currencies.
On the US earning front, Mixed earnings results from Netflix and Tesla sent the two companies’ shares in divergent moves, but the technology sector was particularly under pressure due to macro headwinds. Microsoft, Alphabet, Meta Platforms, and Amazon will report their quarterly results this week, which will be key market movers. The US third-quarter GDP and the PCE data for September are also the focus for clues of the Fed’s future policy stance.
In Asia, China’s stronger-than-expected third-quarter GDP did not lift the regional markets due to the prevailing risk-aversion sentiment. Plus, the Chinese property woes remained an issue for the country’s economic recovery as investment sentiment stayed fragile, despite the government’s policies to stabilize the markets. Globally, soaring US bond yields sent jitters to the APAC stock markets and pressed on the regional currencies, intensifying the equity selloffs.
The Australian stock markets experienced a sharp selloff in the last three trading days of the week amid the global market turmoil, with the ASX 200 falling more than 2%. Energy stocks were the only sector that finished higher, while Technology led losses. The Australian dollar was under pressure due to a strong US dollar. The upcoming third-quarter CPI data will be in the spotlight for the local markets and its currency.
What are we watching?
- USD’s momentum eases: The dollar index finished lower for the week but still held at an 11-month high level, moving between 105.5 and 107 in October. Despite the hawkish Fed’s rhetoric, markets do not expect it will hike the rate anymore within this year as the Fed rate-sensitive 2-year Treasury yield declined in the last two trading days.
- Energy stocks shine, tech shares fall: Energy stocks outperformed amid an escalation in the Hamas-Irael conflicts as oil prices surged on the geopolitical tensions. At the same time, the technology sector was the biggest laggard as these stocks were hit by high bond yields the most.
- Crude oil continues to rise: Both the WTI and Brent futures climbed more than 8% in the past two weeks on intensifying geopolitical tensions as the war may cause fresh sanctions on Iran’s production.
- Gold hits a two-month high: Gold surged since the war started as it is seen as a typical haven asset to hedge market risks. Gold futures briefly topped the 2,000- mark before pulling back to 1,993 on Friday. The momentum may take it to hit an all-time high of above 2,070.
Economic Calendar (23 Oct – 28 Oct )
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