A false alarm, today's actual battle! On Thursday (November 9th) during European trading, market trading was lukewarm and tepid, with the US dollar attempting to rebound for the fourth consecutive day, while gold plummeted for three consecutive days and headed towards 1940. Traders' excitement about the Federal Reserve's rate cut has been shattered by officials' hawkish realism, and investors are waiting for the appearance of Federal Reserve Chairman Powell. Yesterday, he did not provide the latest views on monetary policy, and the market will continue to track.
Futures in the US stock market have stabilized, bond yields have risen, and traders are once again paying attention to policymakers to see if they will retract their stance of high interest rates for a longer period of time.
The European Stoxx 600 index rose 0.5%, reversing its opening decline. Tourism and leisure stocks fell 2%, while industrial stocks rose 1.6%. Profitability remains a key driver of stock market sentiment.
Among European stocks, PayPal's competitor, Dutch payment processing company Adyen NV, saw its stock price soar 37% after investors were reassured by the company's growth prospects. Flutter Entertainment, a gambling company, saw its stock price drop 11% after the company reported lower than expected revenue.
US stock futures trading remained flat, and investors will closely monitor Thursday's release of US initial jobless claims data, as well as speeches from multiple officials, including Federal Reserve Chairman Powell.
The S&P 500 index has risen for 8 consecutive trading days, and Thursday's strong closing will set the longest consecutive rise record since 2004.
The market is also closely monitoring the end of the company's financial reporting season. In pre market trading in New York, Disney Company reported profits that exceeded expectations, and its stock price rose by more than 4%. Due to the weak smartphone market, the earnings of chip design company ARM Holdings are under pressure, with a drop of up to 6%.
Yield or push Fed hawks
The 10-year treasury bond bond yield rose by 6 basis points to 4.53%, having previously fallen to the lowest level in more than a month. The benchmark 10-year borrowing cost in Germany has increased by 4 basis points from the two month low of 2.6% hit on Wednesday.
I think inflation is something of yesterday, "said Luca Paolini, chief strategist at Pictet Asset Management, explaining that the current" big question "is whether the US economy will decelerate significantly in the coming months.
We are optimistic about bonds, "he added. We believe that this is a long-term and positive beginning
The decline in US bond yields has driven an explosive rebound in the stock market and boosted US bonds from a 16-year low. Some investors are now concerned that a further decline in yields may cause the Federal Reserve to maintain a hawkish stance for a longer period of time, potentially damaging asset prices in the longer term.
In the past few months, US bond yields have skyrocketed, pushing up borrowing costs for businesses and households, tightening the financial environment, weakening investors' risk appetite, and suppressing the stock market.
In recent weeks, this relationship has reversed. The yield of US 10-year treasury bond bonds (contrary to the trend of bond prices) has fallen nearly 50 basis points from its peak, while the S&P 500 index rebounded about 6.5% in the same period. But some investors believe that if yields continue to decline, the financial environment may become too loose, making the Federal Reserve feel uneasy, forcing it to maintain interest rates at higher levels for a longer period of time to prevent inflation from rebounding.
"The Federal Reserve may not want the 10-year treasury bond bond yield to be much higher than 5%, but they may not want it to be much lower than 4.5%," said Brian Jacobsen, chief economist of Annex Wealth Management
Analysts from TD Securities believe that the further decline of US treasury bond bond yield will eventually become a "double-edged sword".
If the market interprets the Federal Reserve as a dove and continues to push for possible future interest rate hikes, then financial conditions will ease. This in turn prompts the Federal Reserve to take a stronger stance, "they wrote earlier this month.
The Federal Reserve last week kept its benchmark overnight interest rate unchanged in the current range of 5.25% to 5.50%, and will hold another meeting in mid next month.
Several Fed officials who spoke this week maintained a balanced tone regarding the Fed's next decision, but pointed out that they would focus on the impact of economic data and the rise in long-term bond yields. Their comments to some extent offset the recent bet that the interest rate raising cycle of the Federal Reserve has ended, making traders return to interest rate exposed assets, such as the US dollar and US treasury bond bonds.
Several Federal Reserve officials have warned that US interest rates will remain high for a longer period of time, and the market should be cautious in betting that the Federal Reserve will cut interest rates early. Stubborn inflation and the resilience of the US economy may also attract more interest rate hikes this year.
At a meeting on Wednesday, Powell did not comment on monetary policy or economic prospects. He is scheduled to speak at another meeting later that day.
Although the market interpreted his remarks last week as less hawkish, Powell basically maintained his position that US interest rates will remain high for a longer period of time and more needs to be done to reduce inflation.
The market believes that the Federal Reserve and other major central banks have ended raising interest rates. According to data compiled by Bloomberg, swaps currently show that the average cash interest rates of developed economies will remain stable for the next six months, marking the first time in two years that interest rate hikes during this period have not been taken into account.
European Central Bank Vice President Luis de Guindos has joined the ranks of central bank officials in opposing bets that interest rates will begin to decline next year, and Powell and Lagarde may reinforce this message.
The central bank's comments are still one of the factors driving the market, "wrote Evelyne Gomez Liechti, a multi asset strategist at Mizuho International." In the past few weeks, the market has been a bit too excited about the prospect of interest rate cuts
In addition, the weekly number of initial claims for unemployment benefits in the United States announced on Thursday will be closely monitored, which is seen as an indicator of the performance of the US job market. Economists predict that after 217000 people applying for unemployment benefits last week, the number will reach 219000 this week.
After the outbreak of war between Israel and Hamas last month, the price of gold as a safe haven increased by 10%, but today it has fallen again, losing $1945.
After plummeting nearly 7% in the first two trading days, oil prices hovered around a three-month low.
We often forget that a month ago everyone was panicked about news from the Middle East, but look at the current oil prices, "said Paolini of Pictet. The market is cynical.
