We start this week in a risk on mood, as most Asan stocks rose after the outcome of Japan’s election bolstered expectations for a fiscal stimulus. Japan’s Nikkei rose 2.3% after Prime Minister Fumio Kishida’s Liberal Democratic Party won an unexpectedly comfortable victory. Last week despite high-profile earnings report misses, a central bank surprise decision and uninspiring economic data, the leading US indices set all-time high closes. The focus this week will be on central banks meetings with Fed, Bank of England, and Reserve Bank of Australia all due to meet. Earnings will continue to be a major story in stock markets with travel companies, commodity producers, tech companies, industrials and pharmaceuticals due to report. After October’s disappointing jobs report and the muted GDP number, November’s nonfarm payrolls report on Friday will be closely watched with 385k new jobs added expected. A number of PMI reports will come out this week with China kicking off with a disappointing number of 49.2. The US, UK, Germany and other Euro Zone countries will also report this week.
US stocks overcame early pressure and finished last week higher, with S&P 500 tacking onto its best monthly rally since November 2020. Dow Jones rose 0.3% to 35,820, the S&P 500 Index increased 0.2% to 4,005 and the Nasdaq Composite gained 0.3% to 15,498. The markets showed resiliency in the face of disappointing earnings form Apple an Amazon, that showed how broad the labour, supply and inflation challenges are. In economic news personal income fell more than expected but personal spending rose, while consumer sentiment was unexpectedly revised higher and Chicago manufacturing growth surprisingly accelerated. The Fed will be the highlight of this week and is expected to say it will start to taper bond purchases. Fed funds futures are pricing hikes beginning early in the second half of 2022. The nonfarm report payrolls report will test the strength of the US economy recovery. Expectations are for 385k new jobs, after NFP missed expectations in each of the last two months. The yield on two-year Treasuries, which has soared to an almost 20-month high of 0.5640% last week was last up 1.6 basis points at 0.5169%. 10-year Treasury yields are steady at 1.5627%. The dollar traded near 2 and a half weeks high against major peers with dollar index hovering close to Friday’s peak of 94.302.
European stocks have opened marginally higher this Monday with DAX trading 0.1% higher, CAC 40 rising 0.1% and FTSE 100 rising 0.2%. Attention on Monday will be on the COP26 conference in Glasgow, a UN conference aimed at limiting the effects of climate change. Bank of England is meeting on Thursday and looks likely to raise rates. Swaps pricing points a better-than-expected chance of the hike. Sterling edged to a two-week low of $1.3663. Low-cost airline Ryanair reported its first quarterly profit since the start of the Covid-19 pandemic but warned that it would still make a significant year loss. UK Barclays will also be in spotlight after CEO Jes Staley announced his resignation. In economic news, German retail sales slumped 2.5% on the month in September, as the resurgence of Covid cases weighed on consumer sentiment.
Most Asian stocks rose this Monday after the outcome of Japan’s election increased the expectations for a fiscal stimulus and all-time highs for US shares encouraged some investor optimism. Equities jumped 2.3% in Japan, where Prime Minister Fumio Kishida’s Liberal Democratic Party defied forecasts by preserving its outright majority. Stocks traded lower in China amid data signalling economic weakness due to power shortages, surging commodity prices and Covid Curbs. The Reserve Bank of Australia, that is due to meet this week, appears to have abandoned its yield curve peg and will likely make some guidance adjustment after declining to defend its yield target on Monday.
Oil prices dropped on Monday with Brent crude losing 0.4% to $83.43 a barrel and WTI sliding 0.5% to $83.17. China’s release of gasoline and diesel reserves eased concerns over global supply, while investors are expecting that on November the 4th meeting of major oil producers will increase future production targets. All eyes this week will be on the OPEC+ meeting this week with analysts expecting them to stick to plan to add 400,000 barrels per day of supply in December.