There were no new catalysts to rock the markets, but that didn’t stop Asian session traders from taking on some risks despite their global growth concerns.
- AU Westpac consumer sentiment up by 1.0% vs. 3.0% decline in September
- Japan’s core machinery orders jump by 6.8% vs. -3.9% expected, 11.0% previous
- Japan’s preliminary machine tool orders up by another 2.8% vs. 5.1% increase in August
- Trump: China “not ready to make a deal“
FOMC’s Williams: neutral levels within “the next year or so”
In a speech in Indonesia, New York Fed President John Williams repeated that the Fed is still working on achieving a neutral interest rate. He shared that
“My view is our path today is getting us back to normal interest rates or neutral interest rates relatively quickly, over the next year or so…”
He also justified the goal and pace by saying that:
“From my perspective, the most important thing we can do now is get ourselves well positioned for whatever may come…
Once we’re there, we’re better positioned for whatever may happen. If we need to raise rates more than expected we can do that in a reasonable way. If the economy slows we can adjust to that.”
The permanent voting member also warned that the Fed might not be as clear with its future policies as it has been in the past.
He said that strong forward guidance is becoming “less compelling,” and that “the future direction of policy will no longer be as clear as it was during the past few years.”
Specifically, Williams believes that, soon, “it will no longer be clear whether interest rates need to go up or down, and explicit forward guidance about the future path of policy will no longer be appropriate.”
Mixed market reaction
With no fresh catalyst on the docket, traders continued to price in their concerns over global growth and the escalating U.S.-China trade war.
Fortunately for equities traders, a pullback (or a mini reversal) of U.S. bond yields from the previous session, as well as demand for defensive stocks propped the Asian bourses.
- Nikkei is up by 0.10% to 23,492.0
- A SX 200 is up by 0.33% to 6,042.5
- Shanghai index is down by 0.18% to 2,716.123
- Hang Seng is up by 0.43% to 26,286.3
Commodity prices also went in several directions. Gold, for example, inched higher as a dip in U.S. bond yields dragged the dollar lower and pulled the safe-haven higher.
Meanwhile, crude oil prices started the session on a weak note on the back of global growth worries, but soon steadied as Hurricane Michael in Florida caused the shutdown of about 40% of U.S. Gulf of Mexico crude output.
- Gold is up by 0.03% to $1,189.68
- Brent crude oil is down by 0.08% to $84.78
- U.S. WTI is down by 0.03% to $74.62
Major Market Mover(s):
AUD and NZD
High-yielding currencies like the Aussie and Kiwi, like some Asian equities, found support from falling U.S. bond yields, optimism over a Brexit deal, and a bit of profit-taking from the previous days’ losses.
AUD/USD is up by 17 pips (+0.23%) to .7119; AUD/JPY is up by 25 pips (+0.31%) to 80.48; AUD/CAD is up by 15 pips (+0.16%) to .9210; GBP/AUD is down by 19 pips (-0.10%) to 1.8485, and AUD/CHF is up by 8 pips (+0.11%) to .7052.
NZD/USD is up by 15 pips (+0.24%) to .6486; NZD/JPY is up by 25 pips (+0.32%) to 73.32; EUR/NZD is down by 5 pips (-0.03%) to 1.7748, and NZD/CAD is up by 14 pips (+0.17%) to .8391.
JPY and USD
Asian session traders shrugged off Japan’s strong machine orders reports in favor of pricing in a slightly more risk-friendly trading environment.
Meanwhile, the dollar continued to dip against its major counterparts on the back of falling U.S. bond yields.
USD/JPY is up by 10 pips (+0.09%) to 113.06; CHF/JPY is up by 25 pips (+0.22%) to 114.10; GBP/JPY is up by 32 pips (+0.21%) to 148.78, and EUR/JPY is up by 36 pips (+0.27%) to 130.15.
USD/CHF is down by 9 pips (-0.09%) to .9908; USD/CAD is down by 6 pips (-0.05%) to 1.2938; EUR/USD is up by 22 pips (+0.19%) to 1.1512, and GBP/USD is up by 17 pips (+0.13%) to 1.3159.
Watch Out For:
- 6:45 am GMT: France’s industrial production (0.1% expected, 0.7% previous)
- 8:00 am GMT: Italy’s industrial production (0.7% expected, -1.8% previous)
- 8:30 am GMT: U.K.’s GDP release. Read our mini trading guide if you’re planning on trading the report!
- 8:30 am GMT: U.K.’s manufacturing production (0.1% expected, -0.2% previous)
- 8:30 am GMT: U.K.’s construction output (-0.4% expected, 0.5% previous)
- 8:30 am GMT: U.K.’s goods trade balance (-10.9B GBP expected, -10.0B GBP previous)
- 8:30 am GMT: U.K.’ industrial production to remain at 0.1%?
- 9:00 am GMT: MPC member Andy Haldane to give a speech in London