© Reuters
Investing.com – Fed pause bets and audacity for continued tightening appear to be starting to resurface, with investors’ risk appetite rising again in the equity market.
Dow futures jumped more than 400 points to extend a good start in the fourth quarter, coinciding with a rise in US equity futures on Tuesday, along with lower bond yields and a drop on hopes that central banks may become less aggressive on their plans. Benefit rate increase.
Directed by the United Nations
A UN agency said other central banks risk pushing the global economy into a recession that could be followed by a prolonged depression if interest rates continue to rise, the warning comes amid growing concern for speed. with which the Fed and other global central banks increase borrowing costs to contain the rise in inflation.
Futures and commodities now
Dow futures were up 400 points, or 1.4%, to levels of 29,930 points
Nasdaq futures rose more than 240 points, or 2.1, to levels of 11,520 points
Index futures rose more than 1.7%, or 72 points, to 3755 points.
It continues its growth today, up 1%, after rising 8% yesterday, and an ounce of silver is now at $ 20,797, as gold is climbing above $ 1,700 levels in the largest. jump in 3 weeks, and today is up 0.23% for spot contracts and 0.61% for futures.
As for the dollar index, it continues to fall, losing half a point, to 111.125 against foreign currencies and, despite the decline, it is still below par despite the rise, and registers 0.989 against the dollar.
US Treasury yields are now falling around 2% to the 10-year Treasury yield, which is now 3.579%.
Fierce ascent yesterday
Yesterday, Monday, investor sentiment on Wall Street improved as US yields fell, with the 10-year bond yield dropping to 3.65%, after hitting 4% last week.
The stock market managed to rise at the end of the first sessions of October, after taking heavy losses last month and throughout the entire third quarter of this year, as the Dow Jones fell 8.8% to September.
At the end of the session it rose by 2.7%, equal to 765 points, to 29,490 thousand points, and the “Nasdaq” grew by 2.3%, equal to 239 points, to 10,815 thousand points.
The “S&P 500” rose 2.6%, or 92 points, to record 3,678 points, and the S&P 500 enjoyed the largest percentage gain since July 27, but remained down 22.8% for the year so far.
What is driving the markets?
The S&P 500 was in line to extend the previous session’s 2.6% retracement from the 22-month lows.
There were several factors that drove the rally earlier in the week, including oversold conditions and easing of market tensions in Europe, said Jim Reed, Deutsche Bank (ETR) strategist:
But the main factor has been the growing speculation that central banks may soon shift to a more pessimistic stance, especially after the market turmoil over the past two weeks.
The Fed, along with most of its advanced economy counterparts, has aggressively hiked interest rates in recent months to fight multi-decade inflation, and the resulting rise in bond yields has triggered a bear market across all equity indices. .
Credit Suisse … the start of the curve
Executives hit the phone after spreads on bank credit default swaps, which provide protection against a company default, rose sharply on Friday, signaling investor concerns about its financial health.
“The teams are actively engaging with key clients and counterparties this weekend,” said a Credit Suisse executive involved in the discussions. “We also receive incoming calls from our major investors with messages of support.”
The executive denied recent press reports that Credit Suisse had formally contacted investors about a possible capital increase and insisted the bank was trying to avoid such a move as its share price fell. at historic lows and financial charges increased due to the rating downgrade.
Corner’s move also came on the back of a sharp rise in credit default swaps, a measure of investor sentiment towards risk, which jumped more than 50 basis points in the past two weeks to hit 250 basis points on Friday.
In a subsequent media note on customer discussion topics it was sent to Credit Suisse executives on Sunday, following rumors on social media about the bank’s financial condition.
Staff were told: “There remains a point of concern for many stakeholders, including media speculation. Our position on this is clear as Credit Suisse enjoys a strong capital, liquidity and balance sheet position. of share prices does not alter this fact. “.
Fine frame emphasis
“Many investors are now hoping that the peak of this tightening cycle is on the horizon,” said Jim Reed, strategist at Deutsche Bank (ETR).
Supporting this narrative was a weak US manufacturing survey on Monday, which Barclays (LON 🙂 indicated was easing cost pressure amid shorter delivery delays and backorders.
The US ISM index described slowing expansion faster than investors expected and gave a positive move to the market, said Ipek Ozkardskaya, chief analyst at Swissquote Bank.
important sign
“I think this is an important sign that despite strong rhetoric from Fed officials, many investors no longer believe the Fed can continue to tighten at its current pace,” said Ipek Ozkardskaya, chief analyst at Swissquote Bank.
“This is a good element for the global market recovery,” added Ipek Ozkardskaya, chief analyst at Swissquote Bank.
Stop signs
Adding to this notion was news from Down Under, where the Reserve Bank of Australia hiked interest rates by 25 basis points lower than expected at Tuesday’s meeting, helping Asian equities to rise and bond yields to fall. .
“The multi-asset reaction to the RBA’s 25 basis point increase in sub-consensus rate is critical,” said Stephen Innes, managing partner of SPI Asset Management.
“From a risk perspective, to determine if markets can find relief from the first ‘soft’ axis of a major central bank following the recent rally in cross-assets,” added Stephen Innes.
“Although inflation has not yet peaked in Australia, the more aggressive pace of the RBA suggests it is ready to wait for the effects of the monetary tightening that has already been enacted to fully manifest,” Innes said.
Investors are hoping
“Investors were hoping that this caution would be adopted by the Fed,” said Stephen Innes, managing partner of SPI Asset Management.
He noted that the two-year Treasury yield fell to 4.043%, which closed last week at 4.28%, by 9 basis points in early Tuesday trading at 4.018%.
prospective data
US economic updates scheduled for release on Tuesday include job vacancy and deadline data, along with factory orders.
Fed speakers include Federal Reserve Governor Philip Jefferson and San Francisco Fed Chair Mary Daly.
