US Eco Data Will Again Take Center Stage

Markets

The Minutes of the end October Fed meeting and Nvidia results were the main features for global trading yesterday. The latter were poised to address market concerns on a developing tech bubble causing hiccups of market volatility of late. Both sales for the previous quarter and the outlook were materially stronger than expected and CEO Jensen Huang indicated that at least his company did see ‘something very different’ from an AI bubble. US equity indices already slowed recent correction in the run-up to the (post-market) Nvidia results and US futures are firmly in positive territory this morning. (Nasdaq Future + 1.8%) setting the stage for a risk-rebound today. Of late, the (US) interest rate markets showed an indecisive trading pattern as investors grew ever more uncertainty whether the Fed would already execute a next follow-up insurance rate cut at the December 10 meeting. The minutes at least showed highly different views on policy going forward. ‘Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate as the Committee moved to a more neutral policy stance over time, although several of these participants indicated that they did not necessarily view another 25 basis point reduction as likely to be appropriate at the December meeting’, the report reads. US yields moved again towards the upper part of recent short-term rage adding about 2 bps across the curve. The odds on a December rate cut declined to < 30%. German yields in technical trading mostly gained up to 1.0 bps. Even as equity sentiment improved, the dollar remained well bid, with USD/JPY taking the lead as uncertainty on sustainability of Japan fiscal policy hammered the yen. USD/JPY jumped to close north of 157. DXY (100.25) is again testing the 100.25/36resistance area. EUR/USD drifted further south in the 1.15 big figure (close 1.154). UK gilts underperformed (30-y +6.2 bps) despite a further easing of inflation in October (3.6%). Sterling slightly underperformed (close 0.8835.

This morning, Asian indices (ex-China) mostly join the Nvidia-driven rebound. Headlines (Reuters) on the Japanese government preparing a JPY 21.3 trillion fiscal stimulus package (to be released tomorrow), continue to both pressure Japanese bonds (10-y + 4.5 bps) and the yen (USD/JPY 157.7). Still, the dollar remains well bid overall (EUR/USD 1.152). Later today, for once, US eco data will again take center stage with the delayed release of the US September payrolls, which will be the only new labour market report available for the December Fed meeting. Consensus expected a 51k month job growth. It remains a bit strange for the FOMC to give a heavy weight at one outdated data release to decide on the (timing) of further easing. Even so, a softer figure (September ADP was -32k) might ease recent ‘rise’ in US yields and rebalance expectations on a December fed rate cut. In this process the dollar also nears important resistance levels (DXY 100.25/50 area, EUR/USD 1.1469 November low ) which might also have a role to play in case of a soft report.

News & Views

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