Spreadex Market Update
Soaring Bond Yields Send Equities Tanking
Bond yields have been on the tear this week with US 10-yr yields hitting their highest levels in nearly 20 years at over 4%. The increase is part of a broad lift in global bond yields which we’ve seen take hold following the latest wave of central bank tightening over the last fortnight. The steep increase in yields has seen bond and equities prices alike plummeting lower.
The US Dollar, meanwhile, has continued to push to fresh 20-year high highs, wreaking havoc on the risk complex, sending commodities prices tumbling. Copper futures are now fast approaching a fresh test of the yearly lows following the July/August recovery. An unexpected lift in consumer confidence yesterday, along with hawkish comments from Fed’s Bullard, helped further boost the Dollar.
Key Factors for Today
- USD rally continues following hawkish Fed comments and better data
- Global bond yield rise dragging equities prices lower
- Fresh geopolitical tensions over Nord Stream pipeline damage also adding to bearish tone
- Safe-havens leading in FX while risk currencies fall
- IMF criticises UK tax cuts, calls for review
- Gold and silver head lower with oil prices falling also as USD strength weighs
Coming Up
- USD US pending home sales
- GBP BOE’s Cunliffe speaks
- USD Fed’s Powell speaks
Equities Rout Continues As Bond Yields Surge
Equities markets have continued their losing streak into the middle of the week as rising global bond yields and a rampant US Dollar exert heavy downward pressure. Stocks have seen loses around the globe this week as risk sentiment has also deteriorated around the latest Russia-related news. Reports of damage to the Nordstream pipeline yesterday have been accompanied by accusation of foul-play from Russia and have amplified fears of further disruptions as Europe fast approaches the winter months.
Porsche IPO Pricing To Be Confirmed Today
Traders will be closely monitoring Porsche IPO news today. Volkswagen is set to officially price the IPO after order books close today. Shares have been marketed to investors between 76.50 EUR and 82.50 EUR, valuing the company roughly around 75 billion EUR. The stock due to begin trading a day after the pricing is confirmed.
Safe-Havens Leading in FX
In FX, we’ve seen a reversal of yesterday’s opening dynamic in Europe, Today, USD leads the way while both CHF and JPY have seen firm demand via increased safe-haven inflows. The widespread losses in risk assets are driving investors into safe-haven trades on Wednesday it seems. Risk-linked currencies, therefore, have come under heavy selling pressure with AUD and NZD the two weakest performers today.
IMF Criticises UK Government Tax Cuts
GBP is back under pressure today again. Yesterday, the IMF criticised the UK government’s unfunded tax-cuts as excessive and called on the new chancellor to review the measures and adopt a more considered and targeted approach in November. In particular, the IMF highlighted a review of the tax cuts which benefit the highest earners most.
Metals & Oil Fall Amidst USD Rally
In the metals and commodities space, it’s been a sour start on Wednesday. Both gold and silver prices are under pressure with gold trading at fresh 2022 lows and silver prices headed for a test of yearly lows as the Dollar crushes sentiment. Oil prices are under pressure also with crude sitting just above lows for now. Traders look to the latest EIA report later today which is forecast to see a further small surplus.
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