Markets:
- Gold falls $3 to $2,342
- US 10-year bond yields rose 9.8 basis points to 4.39%
- West Texas Intermediate crude fell 19 cents to $80.64.
- S&P 500 index falls 0.4%
- Australian Dollar Advances, Yen Lags
Friday was the last day of the quarter, and this made drawing conclusions difficult. It was especially difficult because the American political landscape was in disarray due to Joe Biden’s poor debate performance.
All eyes were on the PCE report early in the day, which showed some modest slowdown, albeit accompanied by some pressure on wages. The market’s initial moves were limited to 15 points, and it was the subsequent University of Michigan data that provided a bigger boost as inflation readings eased in that report. However, the dollar selling on both was short-lived and ended the day with only minor movements.
The sell-off in bonds was more dramatic, flattening out and then accelerating late. The timing of the shift points to end-of-quarter flows, but you could also make the case that a Republican defeat and larger deficits are now more likely, as opposed to a divided Congress. As for politics, I’ll spare you the rest of the volatility, but it’s going to be an interesting weekend between the effort to oust Biden and Sunday’s vote in France.
In Japan, the yen is down again despite Kanda’s sacking. The new diplomat in charge of the currency is Atsushi Mimura, and I think he will want to do something to shore up the credibility that has evaporated under Kanda. Although USD/JPY is up on the day, I’d rather point to US yields and French uncertainty.
Have a great weekend. Greg and Eamonn will be back next week.
