We start this busy week in a risk on mood with gains in Chinese stock markets helping the sentiment. Rising treasury yields have lifted the dollar to a near three-year high against Japanese Yen. WTI has topped the psychological threshold of $80 for the first time since 2014. The third quarter earnings season kicks off this week with JPMorgan Chase and other big banks reporting. The focus this week will also be on US inflation and retail sales data, as well as the minutes of the Federal Reserve. While the headline US payrolls number has disappointed on Friday, it was partly due to reopening problems, and unemployment rate has come up lower than expected. The IMF and World Bank will start their meetings today, while UK will publish employment data on Tuesday and GDP on Wednesday. China will release trade balance figures on Wednesday. US and Canada will be closed today for a Columbus Day bank holiday.
US stocks finished near the unchanged mark following a mixed September nonfarm payroll report that saw the headline job growth figure miss severely. Nonfarm payrolls rose by 194k jobs in September, well below consensus of 500k. However, the unemployment rate fell more than expected, to 4.8% versus expectations of a dip to 5.1%. Dow- Jones declined 9 points to 34,746, the S&P 500 Index decreased 8 points (0.2%) to 4,391 and Nasdaq lost 74 points (0.5%) to 14,580. Yields on 10-year notes were trading up at 1.62%, having jumped 15 basis points last week, the biggest rise since March. The dollar rose to its highest versus yen this Monday as investors remained confident the US Fed will announce a tapering of its bond-buying next month despite softer US payrolls figures. USDJPY is trading around 112.725 and DXY is at around 94.154, not far from its one-year high of 94.504 touched earlier this month. US currency and fixed income markets are closed on Monday for a holiday. The key US economic report to watch this week will be Wednesday’s data on consumer price inflation in September. While the rate of price increases has moderated, inflation is still higher than it was pre-pandemic.
European equities finished mixed with volatility remaining, following the much softer-than-expected US September employment report. The market also digested an unexpected decline in German exports for August. This morning European markets have opened flat to negative with DAX losing 0.4%, CAC 40 trading 0.2% lower and FTSE 100 flat. Bonds yields in the Eurozone are mostly higher and rates in the UK gained solid ground, while Euro and British pound traded higher against the US Dollar with British pound firmer at $1.3634 and euro at $1.1575. Bank of England officials gave further hints that an increase in interest rates may be coming to tackle inflation. Markets are almost-fully pricing in the first move by the end of this year with the next monetary policy announcement due on November 4th. UK will publish employment on Tuesday and GDP data on Wednesday which will be in focus this week.
Asian stock markets are trading mostly higher on Monday, ignoring the negative clues form Wall Street on Friday on disappointing monthly jobs data. A 0.5% rise in the Chinese blue-chip index helped to stabilise the mood and MSCI broadest index of Asia-Pacific shares outside of Japan added 0.7%. The drop in yen provided a boost in Japan’s Nikkei which reversed earlier losses to rise 1.6%. Meanwhile Australian stock market traded modestly lower with S&P/ASX 200 Index losing 0.5%. China is due to release data on Trade balance on Wednesday, in which exports for September are expected to continue its double-digit growth with expectations at 21.8%.
Oil prices surged this Monday, extending multiweek gains as an energy crisis gripping major economies continues to dominate the headlines. Brent Crude is up 1.4% at $85.37 a barrel, while WTI up 1.9% at $80.84 a barrel, the highest level since 2014. US Crude rose 4.6% in February. Prices have risen amid a pickup in economic activity and restrained supplies from major producers. Coal and gas prices have also risen, making oil more attractive as a fuel for power generation, pushing crude markets higher.