Market Update – October 6 – Stocks Bounce led by Tech, Yields and Oil hold at highs

• USD (USDIndex 94.00) recovers key handle after 93.65 lows on Monday & 94.50 10-mth highs last week. Better than expected (61.1) ISM Services PMI data.
• Yields moved higher (10yr closed 1.5290%) now at 1.569% in Asian trades – Yields very much “on notice” following RBNZ. (30-yr at 2.14%). China closed until tomorrow, no new Evergrande news, clock ticking.
• Equities turnaround Tuesday, led by Tech (Nasdaq+1.25%; NFLX+5.21%) USA500 +45.0 (+1.05%) at 4345 (but remains weak) USA500.F lower 4311.  Asian equities mixed.  VIX closed at 21.45 – trades up 2% at 22.15 now.  
• USOil holds record highs $78.95 amid supply bottlenecks & inventory drawdowns. EIA Weekly data later.
• Gold slips on higher yields down to $1752 from $1770 highs yesterday. 20-day MA $1765.   
• FX markets USD bid – EURUSD under 1.1600 significantly at 1.1580, Cable holds 1.3600, & USDJPY higher again at 111.75.

Overnight RBNZ increased intertest rates by 0.25% to 0.5%. NZD ticked higher but is now the weakest. German factory orders  -7.7% M/M (largest decline since April 2020); EST. -2.2%, last month +3.4%. Biden spoke with Xi to cool tensions over Taiwan, pushed additional $3.5tn infra budget on tour of mid-west and backed Powell as criticism grows.

European Open – December 10-yr Bund future down 33 ticks, US futures also selling off  after the RBNZ rate hike cemented tapering fears ahead of key US NFP Friday. Stock markets are concerned by stagflation scenarios & risk that reduction of monetary support will hit the global recovery. DAX & FTSE 100 futures down -0.7%, US futures also in the red.

Today – EZ Retail Sales, US ADP Employment Change, Oil Inventories,  Fed’s Bostic, US congress to vote on raising debt ceiling, UK PM Johnson speech.

Biggest FX Mover @ (06:30 GMT) NZDUSD (-0.53%) Initially reacted higher on interest rate rise, to 0.6980 zone only to reverse to 0.6920 now. Faster MAs aligned lower, MACD signal line & histogram trending lower & under 0 line, RSI 30.7 & testing OS zone. H1 ATR 0.0012, Daily ATR 0.0068.

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Stuart Cowell

Head Market Analyst

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