Markets:
- Gold rose $26 to $2,655
- The yield on US 10-year bonds fell by one basis point to 4.08%.
- West Texas Intermediate crude fell 30 cents to $75.56
- The New Zealand dollar advances, and the Japanese yen lags
- The S&P 500 rose 0.7%, reaching a new record high
Friday has turned into a classic day for risk taking but it’s not entirely clear why. Equity futures were negative and the US dollar was flat in pre-market trading, but large bids arrived at the open of US stocks and forex followed the same pattern, with lower Treasury yields leading the front end.
Data was mixed with PPI after CPI rose slightly while UMich sentiment fell to the downside slightly. The most likely reason was bank profits, including comments from JPMorgan that consumer spending was flat and not deteriorating. Earnings from JPM Bank and Wells Fargo were also good, broadly boosting financial stocks.
There are expectations that more Chinese fiscal stimulus will be announced at press events on Saturday and Monday, which could determine trading at the start of the week.
Overall moves were small but the yen underperformed noticeably. This is most likely a product of risk trading but it is also possible that there will be some position adjustment as we count down to the US and Japanese elections. The S&P 500 rose to intraday highs and closed with small stocks particularly higher today and the Russell 2000 rose 2%.
Color performance was noticeably poor again. The session high came before strong jobs data which led to an initial 50 point decline. However, this decline did not fully continue as buyers intervened more quickly and aggressively following the Bank of Canada’s business expectations survey. The Bank of Canada’s October 23 decision is likely to become a litmus test for global central bank easing. The current rate is 50/50 for 25 basis points or 50 basis points. The Canadian dollar has now fallen for eight straight days, which is ominous given the backdrop for oil and stocks in that time period.
Note that the US and Canadian bond markets are closed on Monday for a holiday.
Have a wonderful weekend.