On Tuesday (October 31st), the Bank of Japan only made minor adjustments to its policy settings, disappointing investors and causing the yen to fall to its lowest level since the beginning of this year. After the US stock market's gains were not enough to offset the three consecutive months of decline in the S&P 500 index, Asian stock markets opened mixed.
Stock benchmark futures in Japan and Australia rose, while stock benchmark futures in Hong Kong fell. The S&P 500 index rebounded on the last day of October, but still recorded its worst monthly gain since the outbreak of the epidemic. The yield of 10-year US treasury bond bonds rose, and traders were indifferent to the latest economic data on the eve of the Federal Reserve's decision. Due to the weakening of the yen, the US dollar has stopped falling for two consecutive days.
The Bank of Japan relaxed its control on bond yields on Tuesday, which seems to have failed to meet investors' hopes for clearer signs of progress in policy tightening. The currency experienced its largest daily decline since April, bringing it to a new low so far this year and increasing the risk of government action.
Wolfe Research analyst Chris Senyek said that the yen may continue to weaken, and the Bank of Japan will be forced to shift to a more "hawkish tone" in the coming weeks.
In terms of economic news, US consumer confidence fell to a 5-month low in October, while employment costs unexpectedly increased in the third quarter, highlighting the strong labor market and potentially leading to inflation exceeding the Federal Reserve's target.
Bill Adams, Chief Economist of Comerica Bank, said, "After severely failing to meet inflation targets in the past few years, the Federal Reserve is still concerned about premature easing of its vigilance. They may signal on Wednesday that if inflation deviates from the current downward trajectory, they are prepared to raise interest rates again
In addition to the highly anticipated decision of the Federal Reserve, bond traders expect that the US Treasury Department will announce another round of plans to increase the scale of treasury bond bond auctions this week. Although a considerable number of people predict that the Ministry of Finance will slow down its growth rate to avoid a significant increase in bond yields.
The main concern in some bond markets, especially traditional bond markets, is actually the premium obtained on the curve, which is the term premium. This is related to supply and constantly changing demand dynamics, as well as inflation and the Federal Reserve. Therefore, investors still need to be cautious about long-term bonds, "said Russ Koesterich, portfolio manager of Blackstone Global Allocation Fund in an interview
At the same time, billionaire investor Stan Druckenmiller said that because he was more worried about the economy, he bought a "large number" of bullish two-year treasury bond positions.
Investors are still seeking guidance for the current financial reporting season to assess profit prospects and how companies can resist unfavorable factors such as rising interest rates. This month, the US stock market plummeted, with disappointing performance from technology giants such as Google's parent company Alphabet and Facebook's parent company Meta, dampening market sentiment.
Due to signs that the conflict between Israel and Hamas will still be contained, data showing an increase in production from the Organization of Petroleum Exporting Countries (OPEC) and the United States, and weaker than expected economic data from major Asian countries also raising concerns about increasing demand, oil prices fell to their lowest point in two months on Tuesday. Due to the war stimulating demand for safe haven assets, gold prices continued to decline, falling below $2000 per ounce. However, in October, they still rose 7.3%, making it the best month since March.
In the foreign exchange market, the US dollar index (DXY) rose for the third consecutive month, with an increase of 0.517%. In the past three months, the US dollar index has risen by 4.80%. The trend of the US dollar against major currencies this month shows that it has risen against all major currencies except the Swiss franc. The euro has hardly changed against the US dollar this month. The biggest increase was against the New Zealand dollar, which rose 2.87%, and against the Canadian dollar, which rose 2.19%.
Wednesday trading day focus and wind vane:
① 09:45 China October Caixin Manufacturing PMI
② 15:00 Nationwide House Price Index Monthly Rate for October in the UK
③ 17:30 UK Manufacturing PMI for October
④ 20:15 ADP employment in the United States in October
⑤ 20:30 US Treasury announces a 3-month bond issuance plan
⑥ 21:45 Markit Manufacturing PMI Final Value for October in the United States
⑦ 22:00 US October ISM Manufacturing PMI, US September JOLTs Job Vacancies, US September Construction Expenditure Monthly Rate
⑧ 22:30 EIA crude oil inventory series data for the week from the United States to October 27th
⑨ The next day at 02:00, the Federal Reserve announced its interest rate resolution
⑩ The next day at 02:30, Federal Reserve Chairman Powell held a press conference
Analysis of Major Currency Trends:
EUR: EUR/USD fell, closing at 1.0574, a decrease of 0.38%. Technically, the initial resistance to the upward trend of the exchange rate is at 1.0644, the further resistance is at 1.0717, and the key resistance is at 1.0760; The initial support for the downward trend of the exchange rate is at 1.0528, further support is at 1.0485, and more critical support is at 1.0412.
GBP: GBP/USD fell to close at 1.2152, a decrease of 0.14%. Technically, the initial resistance to the upward trend of the exchange rate is at 1.2192, the further resistance is at 1.2236, and the key resistance is at 1.2273; The initial support for the downward trend of the exchange rate is at 1.2110, further support is at 1.2074, and more critical support is at 1.2029.
JPY: USD/JPY up, closing at 151.666, up 1.75%. Technically, the initial resistance to the upward trend of the exchange rate is at 152.592, the further resistance is at 153.505, and the key resistance is at 155.296; The initial support for the downward trend of the exchange rate is at 149.888, further support is at 148.097, and more critical support is at 147.184.
