In today’s financial markets, bonds and stocks are experiencing upward movements, while the dollar’s performance remains mixed. The euro faces some pressure due to a weak PMI reading, while the Australian dollar stands strong among the G10 currencies. In yesterday’s North American session, there was an increased appetite for foreign currencies, and this momentum could potentially repeat today.
Asia Pacific
The MSCI Asia Pacific Index has broken a four-day downward trend, with the major markets in the region showing gains, except for Hong Kong and India. In Europe, the Stoxx 600 index attempts to halt a five-day slide but faces difficulties in maintaining early upside momentum. The US S&P 500 and NASDAQ recovered from opening gaps, with the NASDAQ closing slightly higher while the Dow and S&P 500 settled lower. However, the indices are currently exhibiting a firmer tone. The unscheduled bond purchases by the Bank of Japan (BOJ) may have relieved some pressure on Japanese Government Bonds (JGBs). However, yields are softer across the board.
Australia and New Zealand’s 10-year yields have dropped 8-9 basis points, while European benchmark yields are mostly 4-7 basis points lower. The 10-year US Treasury yield, which briefly exceeded 5% yesterday, is now slightly softer at around 4.84%. Gold is hovering near yesterday’s low of approximately $1964, staying below yesterday’s high at about $1983. December WTI crude oil hit a marginal new low near $85, marking a five-day low but has since stabilized.
Japan’s Weak Flash PMI: Flash October PMI deteriorated, with the manufacturing PMI remaining unchanged at 48.5. It has not been above 50 since May. The services PMI declined to 51.1 from 53.8, marking the first time it has fallen below 50 since August 2022. The composite PMI slipped below 50 for the first time this year, standing at 49.9, down from 51.2 in September. The Japanese government is expected to introduce more stimulus to bolster the economy, including a supplemental budget and income tax cuts.
Read more:What Is the Purchasing Managers’ Index (PMI)? – Tradingcompass
Australia PMI
Australia’s Weak Flash PMI: Australia’s flash PMI also performed poorly, with the manufacturing PMI remaining below the 50 threshold. The October preliminary reading came in at 48.0, down from September’s 48.7. The service sector also contracted, with the preliminary reading falling to 47.6 from 51.8. The composite PMI dropped to 47.3 from 51.5, marking its weakest level since January 2022. Despite these numbers, the Reserve Bank of Australia is expected to maintain its hawkish stance at the upcoming meeting.
The Dollar’s Performance
The dollar briefly rose above JPY150 in early Asia Pacific trading on Monday, while the US 10-year yield pushed above 5.0%. However, North American dealers reversed this trend as the US 10-year yield fell to approximately 4.83%, causing the dollar to decline broadly and reach a new session low near JPY149.50.
The dollar’s performance against the Japanese yen is closely watched, with options for $1 billion struck at JPY149.50 and another set at JPY150 for $1.7 billion. The Australian dollar, on the other hand, posted a bullish outside up day, trading on both sides of Friday’s range and closing above its high. Despite disappointing PMI figures, the Australian dollar continued to strengthen, with the next target being last week’s high near $0.6395.
The eurozone economy is showing continued weakness, as indicated by the flash PMI figures. The preliminary manufacturing PMI has dropped to a three-month low of 43.0, down from 43.7 in September. Germany’s flash manufacturing PMI improved slightly to 40.7 from 39.6, while France’s preliminary reading fell to 42.6 from 44.2. The eurozone’s flash services PMI dropped to 47.8 from 48.7. The highlight of the week is the European Central Bank (ECB) meeting on Thursday, and the market is confident that the ECB will maintain the current policy stance.
In the UK, labor market data showed a decline in employment and a rise in jobless claims. The preliminary October PMI figures remained little changed from September, indicating manufacturing improved to 45.2 from 44.3, while services PMI remained nearly flat at 49.2 from 49.3. The composite edged up to 48.6 from 48.5.
Weak Flash PMI :Currency Movements
The euro’s five-day moving average recently crossed above the 20-day moving average, leading to a sharp rise in the euro’s value. The euro reached its highest level since September 20, at approximately $1.0680, with gains not seen since mid-July. Sterling also advanced for the third consecutive session, reaching about $1.2260, its best level in almost two weeks. However, selling pressure re-emerged, and the currency retreated to near $1.2235.
America
Expectations for a strong US Q3 GDP are likely to be confirmed later this week, with forecasts indicating a 4.5% growth rate, more than double the pace of Q2. The manufacturing PMI has remained below 50 for every month since last October, except for April, while the services PMI has not fallen below 50 since January. The composite is also expected to ease to 50 from 50.2 in August and September. In Mexico, the IGAE activity showed some improvement, and today’s focus shifts to inflation.
The US dollar reached a three-day low against the Canadian dollar, slightly below CAD1.3670, and saw the range extend to CAD1.3660. To signal a significant technical shift, the greenback must fall below last week’s low, ideally reaching the CAD1.3570 area. The US dollar extended its pullback against the Mexican peso, with MXN18.00 being a psychological level and the 20-day moving average near MXN17.96.
In summary, the financial markets are experiencing mixed performance, with stocks and bonds rising while the dollar’s performance remains inconsistent. Weak PMI readings have impacted various currencies, and the global economic landscape continues to face challenges.
