The strongest to the weakest of the major currencies
As the North American session begins the GBP is the strongest of the major currencies while the NZD is the weakest. The USD is weaker as yields have dipped a bit in trading today. That did not come before the 30-year bond reached 5.0% (currently at 4.885%). The 10 year yield reached 4.88% (currently at 4.766%). Yesterday the JOLTs job openings showed a sharper than expected rise of 9.61M vs 8.80M estimate. That sent yields higher, stocks lower. The Dow industrial average at its worst days in March and is now negative on the year (-0.44%). Meanwhile, in Europe, German 10 year yields moved to the highest level since 2011.
In New Zealand, they kept their official cash rate unchanged at 5.5%. According to the RBNZ statement,
- The decision was influenced by the current economic conditions where interest rates are limiting economic activity and helping in reducing inflation.
- They acknowledge that the growth in demand within the economy is slowing down, and with the restrictive monetary conditions, it is expected to decline further.
- On a global scale, economic growth is below the expected trend, and inflation has decreased for most trading partners.
- They said the New Zealand economy is experiencing downward pressure on export volumes and prices due to weakened global demand.
- To alleviate inflationary pressure, a prolonged period of subdued economic activity is necessary. There are concerns that economic activity and inflation may not slow down as required, and a significant slowdown in global economic demand, especially from China, could adversely affect commodity prices and New Zealand’s export revenue.
- The committee believed that keeping the OCR at a restrictive level is essential to bring annual consumer price inflation within the 1 to 3% target range and support maximum sustainable employment.
The NZDUSD moved to a low of 0.5868 but has since rebounded back above the 0.5900 level currently.
The next employment report for the week will be released today with the ADP employment report for September being released at 8:15 AM. The expectations are for 153K versus 177K last month. At 10 AM August factory orders are expected to rise by 0.2% versus -2.1% in July. The BLS view of the employment situation will be released on Friday with expectations of 171K versus 187K last month. The unemployment rate is expected to dip to 3.7% from 3.8%.
Meanwhile in Washington, the Grand Old Party (GOP) is in disarray. The Speaker the House Kevin McCarthy was removed from his position late yesterday marking a historic event as he became the first individual to be ousted from this role. This development occurred after McCarthy lost a roll call vote by a narrow margin, a result of an internal conflict within the Republican party. The conflict stemmed from McCarthy’s last-minute agreement with Democrats on a temporary spending measure to prevent a government shutdown, a move that did not sit well with some of his far-right Republican colleagues, led by Matt Gaetz. As a consequence of McCarthy’s removal, all House activities, including discussions on government funding, have been put on hold until a new Speaker is elected next week (hopefully – it took 15 votes to elect McCarthy). The Republicans, despite having a slight majority, are now faced with the challenge of identifying a new leader amidst internal divisions. PS There could be another government shutdown in 42 or so days, so they better get their house in order.
In European data today, PMI services data was generally better-than-expected. Spain, France, and Germany showed better than expected data while Italy was worse than expected. Spain services PMI move back above the 50 level at 50.5 versus 49.3 last month. Germany also moved back above the 50 level at 50.3 versus 49.8 last month. The EU final services PMI improved from 48.4 last month to 48.7 this month (was estimated at 48.4).
Retail sales in the EU were worse than expected however at -1.2% versus -0.5% expected (last month it fell -0.1%).
Stocks are modestly higher. The S&P index yesterday sniffed the 4200 level and the 200-day moving average at 4201.98. The price low yesterday reached 4216.45. Yields are modestly lower. Crude oil is lower.
A snapshot of the markets as the NA session gets underway shows:
- Crude oil is trading down $-1.88 or -2.10% at $87.36
- Spot gold is trading down up $2.11 or 0.12% $1824.93
- Spot silver is trading up $0.03 or 0.13% at $21.20
- Bitcoin is trading at $27,588. At this time yesterday, the price was trading at higher at $27,565. .
In the US premarket for US stocks, futures are implying a lower opening
- Dow Industrial Average futures are implying a gain of 51 points after Tuesday’s -430.97 point decline
- S&P index futures are implying a gain of 12.3 points after yesterday’s -58.94 point decline
- NASDAQ futures are implying a gain of 59 points after yesterday’s -248.314 decline
In the European equity markets, the major indices are trading mixed:
- German DAX, +0.19%
- France’s CAC, +0.34%
- UK’s FTSE 100, -0.08%
- Spain’s Ibex, -0.16%
- Italy’s FTSE MIB, -0.06% (10 minute delay)
In the US debt market, yields are modestly lower. The 30-year bond reached 5.01% overnight before rotating back to the downside. The 10 year yield reached 4.88%. The 2 – 10 year spread is at -35 basis points which is steeper than the -38 basis points at this time yesterday:
- 2-year yield, 5.131% -1.7 basis points
- 5-year yield, 4.788% -1.4 basis points
- 10-year yield, 4.776% -2.5 basis points
- 30-year yield, 4.896% -4.0 basis points
- 2 – 10 year spread is trading at -35 basis points after trading at -38 basis points at this time yesterday
In the European debt market, benchmark 10-year yields are trading minus the lower:
European benchmark 10 year yields