Markets:
- JPY leads, USD lags
- US 10-year yields down 6 bps to 4.18%
- S&P 500 up 0.6%
- Gold up $13 to 2653
- WTI crude oil down $0.57 to $68.00
Markets were surprisingly lively for a de facto US holiday. Bids were strong in risk assets, which got help from a report saying US restrictions on chip exports may not be as strict. At the same time, softer eurozone inflation numbers might have fuelled a broader bid in bonds.
The Canadian GDP report also underscored a picture of a slowing global economy with rates that are needlessly high.
At the same time, it’s tough to square slowing growth in Europe and Canada with stronger currencies against the US dollar. Many are pointing to month end as the source of the Treasury bid and USD softness. Others point to the pick of Scott Bessent or fresh rumors about Chinese stimulus.
We will get answers about the turn of the calendar on Monday and I will be keeping a close eye on USD/JPY, as it appears to be embarking on the same kind of dramatic breakdown that we saw in the summer. That eventually spread to risk assets so some caution is warranted, though US economic data hasn’t shown many cracks yet.
Have a great weekend.