Darren Sinden from educational provider Trade Uni discusses the latest market moves.
Many major equity indices retreated yesterday, with the S&P 500 down by 0.2%, a slight slip after almost six weeks of gains. However, the Nasdaq 100 and its composite stablemate finished up on the day by 0.3%. Those mixed signals typify what's going on in the markets right now, where several different narratives seem to be playing out simultaneously.
US 10-year treasury bond yields edged higher again yesterday, trading up to 4.19% from 3.73% a month ago, and it's a similar story across the curve. This is not what economic orthodoxy suggests should be happening right now. After all, the US Federal Reserve has just embarked on a rate-cutting program and the chances of another 25-basis-point reduction on 7 November are set at 87%, according to Fed funds futures. However, there is no sign of the second 50-basis-point cut that some were predicting back in September, with the probability of that happening falling to zero in mid-October.
Gold continues to move higher, up by almost 0.5% in Europe this morning. However, silver is outshining the yellow metal, trading higher by 0.84% at $34.14 per ounce, up by more than 11% over the last month. This is untested territory for both precious metals and while some of the recent gains are likely to have been driven by momentum traders, how much of the rise has been down to safe-haven buying?
The dollar index has paused for breath this morning and is trading flat on the day in Europe, but has rallied by more than 2.92% over the last month, an unexpected move during a rate-cutting cycle. One conclusion from this could be that the market - or at least sections of it – are discounting rapid interest rate cuts in the US. Could November’s Federal Open Market Committee meeting mark a pause in rate-cutting from the Fed due to the strength of the underlying economy and jobs market, or are bond markets repricing the cost of lending to the US government as its debts and deficits continue to expand?
All major European equity indices were in the red by close of play yesterday and many are now down over the last week. Even the Italian MIB 40, which has been resilient of late, was down by 0.7%. The big fallers in the Euro Stoxx 50 were Munich Re, down by almost 3%, Vonovia which fell by 2.6% and L’Oreal which dropped 2.7%.
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