
Monday Morning Coffee: Global Markets Navigate Losses Amidst Geopolitical Tensions
Economic Calendar
Global Markets Roundup: 23 Oct 2023
**APAC Stock Declines Echo Wall Street:**
Equity markets across the Asia-Pacific region experienced widespread losses today, mirroring the downward trend witnessed on Wall Street last Friday. Notably, Foxconn shares faced a decline, influenced by an ongoing investigation in China.
**Commodities and Safe-Havens Respond to Stability:**
Overnight, oil futures, spot gold, and the Swiss Franc moderated as geopolitical risk subsided in the absence of significant developments in the Middle East over the weekend.
**Middle East Tensions:**
In the Middle East, an Israeli official communicated a resolute stance, stating that there would be 'no ceasefire' in Gaza. The United States is reportedly urging Israel to postpone a potential invasion of Gaza to facilitate the release of hostages. Meanwhile, Israeli Prime Minister Netanyahu issued a stern warning, asserting that any conflict with Hezbollah would result in unimaginable devastation for both Lebanon and the militant group.
**European Markets Show Resilience:**
European equity futures are relatively stable, with the Euro Stoxx 50 future showing a modest increase of 0.1%. This comes after cash markets closed down 1.6% on Friday.
**BoJ Contemplates YCC Adjustments:**
Officials from the Bank of Japan (BoJ) are reportedly considering adjustments to the Yield Curve Control (YCC) framework. This potential move is prompted by the simultaneous rise in domestic long-term interest rates in response to the increasing rates in the United States.
**ASX 200 and Nikkei 225 Encounter Early Losses:**
On Monday, the ASX 200 faced a decline at the market open, notably driven by losses in the Metals and Mining sector. This retreat aligned with the broader price movements observed in base metals.
Similarly, the Nikkei 225 experienced weakness, particularly in the Energy and Materials sectors. Despite the downward pressure, the index managed to remain above the 31,000 mark.
**Hang Seng Closed, Shanghai Comp Follows Regional Trend:**
Due to a public holiday, the Hang Seng remained closed for trading. Meanwhile, the Shanghai Composite mirrored the regional losses, reflecting a broader sentiment of caution.
In Taiwan, Foxconn, a key Apple supplier, saw a notable decline of over 3%. This drop followed reports from Global Times sources, indicating that Chinese mainland tax and natural resource authorities have initiated inspections on key enterprises associated with Foxconn.
**FX Markets Navigate Cautious Tone:**
In the foreign exchange markets, the Dollar Index (DXY) demonstrated a contained performance, fluctuating within the 106.17-32 range during APAC hours. The prevailing cautious risk sentiment influenced trading dynamics.
EUR/USD maintained a steady course beneath 1.0600, operating within the parameters of Friday’s range from 1.0563 to 1.0603. Similarly, GBP/USD stayed above 1.2150, with limited upward momentum amid light newsflow. EUR/GBP found support just above 0.8700.
USD/JPY, initially above 150.00 in early APAC trade, later fluctuated below this level within Friday’s band of 149.72-150.03. The BoJ's potential discussion on Yield Curve Control (YCC) tweaks, as reported by Nikkei sources, had a muted initial impact on the currency pair.
AUD and NZD experienced a flat performance, mirroring the non-committal risk tone. Meanwhile, the Swiss Franc underperformed, shedding some geopolitical risk premium alongside gold and oil.
The Indonesian Central Bank remained active in the foreign exchange market, maintaining intervention efforts, according to Reuters.
**Fixed Income Markets Reflect Weekend Dynamics:**
In the fixed income space, 10-year UST futures witnessed a modest gap lower after Friday’s rally. Bund futures exhibited a slight negative bias, receding further below 128.00 within the Friday confines of 127.48-128.13.
Despite reports of BoJ officials contemplating YCC tweaks due to the rise in domestic long-term interest rates alongside the US, 10-year JGB futures showed relative flatness with limited reaction to the news.
**Commodities React to Weekend Developments:**
Crude futures adopted a subdued stance, reflecting losses from Friday as geopolitical tensions eased. Spot gold unwound some geopolitical risk premium, retracting from Friday's high of USD 1,997.65/oz.
Copper futures echoed the cautious sentiment in the APAC region, while Dalian iron ore futures experienced a decline of over 3% in early trade.
The Baker Hughes US Rig Count for the week ending October 20th showed a marginal increase in oil rigs.
Russia is reportedly considering an additional gas tax to subsidize oil refiners, according to Bloomberg. Gazprom plans to exceed contractual obligations by supplying extra gas to China and Hungary this year.
In light of Middle Eastern tensions and concerns over the Baltic pipeline, the EU is contemplating an extension of the emergency gas price cap introduced in February, as reported by the FT. The move aims to mitigate potential increases in gas prices this winter.
**Upcoming Events and Earnings:**
Looking ahead, investors are attentive to key economic indicators, including the Eurozone Consumer Confidence Flash and Australian Flash PMIs. Additionally, corporate earnings reports from Philips, UniCredit, and Sandvik are anticipated to provide insights into the financial landscape.
As global markets navigate geopolitical uncertainties and economic data, the week unfolds with a keen eye on developments in the Middle East and the outcomes of corporate financial performances.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team