- MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent, while Japan's Nikkei dropped 0.5.
- Global bond sell-off triggers the biggest decline in US equities in nearly four months. As 10-year treasury yields surge to the highest level since 2011, fears that current rates could restrain growth has hit stocks across the US, Europe and Asia.
- FTSE 100 posting its biggest drop since August yesterday.
- The Dow Jones drops more than 250 points as treasury yield rates surge, while the S&P 500 lost 0.82 percent and the Nasdaq Composite dropped 1.81 percent.
- In EM the Indian rupee has strengthened going into the RBI interest rate decision.
- After significant devaluation of the Turkish lira recently, it looks like the re-balancing of its economy is under way as the trade ministry report an increase in exports. This has been faster and stronger than expected.
- US non-farm payroll release today. US Labour department forecasts an increase of 185,000 in non-farm payrolls last month and the unemployment rate is expected to fall by 0.1% to 3.8% - an 18 year low.
Asian overnight: Once again it is the Australian ASX 200 which provides the one outlier to a wider bearish story within Asia, where China remains the notable absence for the duration of the week. Data-wise, the Australian economy received a boost in the form of a stronger retail sales number, coming in at 0.3% as expected. Emerging market currencies have been under pressure this week, and the Indian Rupee is in focus today, the RBI expected to raise rates later in the morning.
UK, US and Europe: The US Treasury yield is making headlines and often seen as a ‘safe haven’ or risk free investment over periods of potential uncertainty. A rising curve is generally seen as negative across other asset types. Wall Street also took a hit as FANG stock drew blood as investors and speculators begin to price in a potential acceleration in inflation.
Continued positives in jobless claims and factory orders out yesterday all painted a good picture for the US economy, nicely lining up the non farm payrolls figure due at 1.30pm BST. As always any USD cross will likely experience significant volatility around this time, along with most assets quoted in USD. Bond markets, oil, and inelastic soft commodities may also see fallout.
A relatively quiet European session today sees very little in the way of major market moving events, where the German factory orders has already been released before the bell (up to 2% vs 0.7% expected). Following yesterday’s relative lull in data, today sees all eyes turn towards the US once more, with the jobs report due out alongside the Canadian version. The rise in yields off the back of strong US data on Wednesday is likely to come back into play for traders. Those following this trade should keep an eye on the jobs numbers, as a similar outperformance is expected to bring another surge. Meanwhile, coming off the back of the US-Canada trade deal, the Canadian dollar could receive another boost with markets expecting an improved employment change and unemployment rate today.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
1.30pm – US non-farm payrolls (September), balance of trade (August): forecast to see 185K jobs created from a reading of 201K a month earlier. The unemployment rate is expected to fall to 3.8% from 3.9%, while average hourly earnings rise 0.2% MoM from 0.4%. Trade deficit to narrow to $50 billion from $50.1 billion. Markets to watch: US indices, USD crosses
1.30pm – Canada employment (September): 11,400 jobs expected from a drop of 51,600 a month earlier. Market to watch: CAD crosses
Corporate News, Upgrades and Downgrades
- Lenovo shares drop 20% following report over alleged Chinese spy chips.
- Unilever withdraws proposal to simplify dual structure.
- Danske Bank confirmed yesterday that the US DoJ is investigating potential money laundering activity and that they’re received a ‘request for information’. Danish regulators have said they want the bank to increase their capital reserves, whilst Danske themselves recently confirmed they’re going to stop a share buy back program. Shares are down nearly 40% from the beginning of the year.
- Intu Properties faces a takeover by its largest investor, Peel Group, in a multi-billion pound deal.
- Toyota recalling over 2.4 million hybrid vehicles over battery faults.
- Centamin has lowered gold production guidance for the year, with output now expected to be around 480,000 ounces, below the 505-515K oz. However, Q3 production was up 27%.
Intertek Upgraded to Buy at Berenberg
Eutelsat Upgraded to Buy at Goldman
Proximus Upgraded to Overweight at JPMorgan
Helvetia Downgraded to Hold at Baader Helvea
Antofagasta Downgraded to Sell at Goldman
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