Article / 28 October 2016 at 7:00 GMT

Morning Markets: Dollar holds firm as bonds sell off

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Watchlist

  • France Q3 Gross Domestic Production (0530 GMT)
  • Spain Q3 Gross Domestic Production (0700 GMT)
  • Euro area October Business and Consumer Survey (0900 GMT)
  • US Q3 Advance estimate Gross Domestic Production (1230 GMT). 

The US dollar is holding firm against its peers after government bonds and other safe-haven assets took a tumble on the perception that the global economy is steadying after a protracted period of turbulence. 

But the veracity of that perception will be put to the test later on Friday when preliminary figures for US third-quarter GDP will be released. While growth is expected to remain on an upwards track there is some doubt about whether this will be sufficient to sustain the "slow recovery" stateside and hence will have a direct bearing on the outlook to a Federal Reserve interest rate hike in December.

Elsewhere, equities performed well in Japan on Friday, with the Nikkei 225 making strong gains. In Australia, the S&P/ASX200 racked up yet another day of falls, and ended sharply lower for the week. Worries about what the Fed might do, and how the US will vote next month, along with company-specific concerns are weighing on sentiment down under.

Market signals

Asian session

  • China's Communist Party has named president Xi Jinping its "core leader"
  • The unusual move is a sign that Xi's faction is consolidating its dominance
  • Japan's CPI down fell for a seventh straight month, down 0.5% yoy in September
  • Japanese households spent 2.1% less in September than a year earlier
  • Japan's Nikkei 225 made strong gains; it was up 0.68% to 17,454.08 at 0550 GMT
  • The ousted chairman of India's Tata Sons has issued a letter critical of the conglomerate
  • Tata says its former chairman made "unsubstantiated claims and malicious allegations"
  • India's S&P BSE Sensex was up 0.1% to 27,943.65 at 0611 GMT
  • The proposed Stokex stock exchange in Edinburgh may use Blockchain technology
  • The unproven Blockchain system would remove the need for a clearing house
  • Apple has introduced an innovative phone-like touch bar feature for its MacPro laptop
  • Australia's S&P/ASX200 lost ground, dashing hopes of a rebound
  • The S&P/ASX200 closed down 0.22% at 5,283.80; that's a 2.7% fall for the week
  • The Reserve Bank of Australia meets on October 4 – on Melbourne Cup day
  • Six out of 27 economists surveyed by Bloomberg think the RBA will cut rates next week

Forex ahead

  • The US dollar made gains against the yen; it was worth ¥105.2180 at 0524 GMT
  • The Australian dollar edged close to 0.76; it was worth 0.7594 at 0524 GMT

From the Floor

Shaken and stirred. "Surging bond yields are the key story right now, any further rise could strongly affect JPY,"  Hardy


That CPI effect. "It does not need much inflation to see dramatic moves in government bond markets," Boye 


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In opinion

1...2...3
Beware false optimism over the Eurozone, as much needs to be done for the currency union to sustain growth, including reforms and making bank healthy banks, warns Juhani Huopainen.


Yields steepen
There's a sense that safe haven sovereign bonds will be sold off as yields start to rise on a number of Antipodean and other bonds, as Saxo's Singapore team reports.


Downside up, upside down?
Better-than-expected advance third-quarter GDP data further strengthens the view that the UK has reached the floor in monetary policy, while markets now see a 70% likelihood of a Fed hike by year-end, says Neil Staines.

nnn
Scots take stock ... the push to set up a separate stock exchange based on novel technology in Edinburgh is another step towards independence for Scotland. Photo: iStock

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