_edited_edited.png)
Markets Update: FOMC Keeps Rates Unchanged, APAC Stocks Gain, European Equity Futures Point to Higher Open.
Economic Calendar
Global Markets Roundup: 02 Nov 2023
The US Federal Reserve kept interest rates unchanged on Wednesday, as expected. Chair Jerome Powell downplayed the significance of the September dot plots, which had shown that some Fed officials expected rates to rise above 5% next year. This dovish stance from the Fed boosted risk appetite, and APAC stocks followed suit to the gains on Wall Street. European equity futures are also indicative of a higher open on Thursday, with the Euro Stoxx 50 up 0.7%. The US Dollar remains softer post-FOMC, and EUR/USD is pivoting around the 1.06 mark. USD/JPY is also continuing to pull back from 151.
The ASX 200 was higher, with notable outperformance in tech and real estate amid a drop in yields. The Nikkei 225 briefly climbed above 32,000, with the biggest movers driven by earnings and automaker updates. The Hang Seng was boosted by a surge in tech and strength in property, while the Shanghai Composite lagged after another substantial PBoC liquidity drain.
The US Dollar (DXY) softened on Thursday post-FOMC, as yields declined following Chair Jerome Powell's comments. Powell poured cold water over the September dot plots, noting that they are not a perfect guide to future monetary policy and that the Fed is close to the end of its tightening cycle. However, he also stressed that the Fed is not confident that monetary policy is sufficiently restrictive.
The Euro (EUR/USD) gained amid the softer buck, briefly reclaiming the 1.0600 level. The British Pound (GBP/USD) also snapped out of its choppy mood and approached closer to the 1.2200 level, with attention now shifting to the Bank of England's policy decision. The Japanese Yen (USD/JPY) continued to pull back from the 151.00 level after US-Japan yield differentials narrowed post-FOMC. However, some of the downside was stemmed after finding support around its 200-hour moving average. The AUD and NZD currencies were underpinned by their high-beta statuses and amid a slight reprieve for commodity prices.
Fixed Income
10-year US Treasury (UST) futures extended their gains on Thursday, following soft US data releases and dovish comments from Fed Chair Powell, as well as the slowing pace of Treasury auction size increases. Bund futures held on to their recent gains, but plateaued near resistance around the 130.00 level. 10-year Japanese Government Bond (JGB) futures steadily edged higher, taking impetus from global peers, but eased off their best levels after weaker metrics from the latest 10-year JGB auction.
Commodities
Crude oil futures nursed some of their prior day's losses after whipsawing in the build-up to the FOMC. Spot gold was rangebound, with tailwinds from a softer dollar offset by a lack of haven demand. Copper futures were underpinned as risk assets benefited from the dovish aspects of Powell's rhetoric.
Implications The FOMC's decision to keep rates unchanged suggests that the Fed is becoming more cautious about the outlook for the US economy. Powell's downplaying of the September dot plots is also a sign that the Fed is willing to be more flexible with its monetary policy. The positive performance of APAC stocks and European equity futures suggests that investors are becoming more optimistic about the outlook for the global economy. The softer US Dollar is also supportive of risk assets. Overall, the outlook for markets in the near term is positive. However, investors are likely to remain cautious until they have more clarity on the outlook for the global economy and the path of US monetary policy.
Looking ahead, the key highlights on Thursday include:
US IJC and Factory Orders data releases
BoE and Norges Bank policy announcements
Speeches from BoE's Pill, ECB's Lane and Schnabel
Supply from Spain and France
Earnings from Fresenius, Hugo Boss, ING, Lufthansa, BT, Sainsbury's, Shell, and Apple
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team