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Stock markets ended yesterday's session largely unchanged

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
Modest gains for Wall Street after a session of continuous ups and downs

The session started lively, with gains fueled by news from China that they were lifting restrictions. Although quite gradual now, the reopening of China removes one of the dark clouds that hovered over the market by directly hampering supply chains with the consequent inflationary effect while paralyzing manufacturing production in the West.

 

But the enthusiasm was short-lived; during the session, there was a phenomenal rise in market interest rates (the 10-year Treasury yield bond increased ten bps to 3.03%) that curbed the initial rises in stock indices. This setback was also influenced by the fall of Twitter due to Elon Musk's announcement that he would withdraw his offer to buy the company if he did not access the information about the bots and fake accounts.

 

The huge one-day rise in Treasury bond yields is not entirely clear. Some market analysts attribute it to the inflation fears to the persistence of rising prices for Oil and Natural Gas. The reopening of China has also contributed marginally to the surge in Oil purchases. It is also true that the opinion on more aggressive actions by central banks is spreading more and more, from the Central Bank of Australia to that of Canada, without excluding the European Central Bank that meets this week and is believed to discuss the next rate hike of 50 bps.

There is enormous uncertainty about this topic, and there is no widespread consensus. What the Federal Reserve is going to do, in addition to the two increases of 50 bps in its next two meetings, is going to depend a lot on the figures published from now on - the CPI data this Friday will be of enormous importance. The expectations for this figure are not positive, and a greater rebound in prices is expected. Maybe, that’s why the week has begun with sales of treasury bonds that have taken yields to levels close to the maximum.

 

The US dollar has strengthened against all its peers.

The most significant movement has occurred in the USD/JPY pair, which has surpassed the highs of the beginning of May to the 132.00 area. This puts the market's focus on a potential reaction from the Japanese monetary authorities, who have already shown their disagreement with an excessive weakening of the Japanese currency.

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Sources: Bloomberg.com, reuters.com

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.