Yields Offer Some Respite

Swings 

Lower oil, a weak ADP number – Treasury yields gave back some ground and the dollar pulled back from an 11-month high, enabling equity markets to put on a bit of a show yesterday, though the FTSE 100 lagged significantly due to the drop in crude prices which has underpinned its outperformance of late. Higher oil prices had been on the factors behind renewed angst over inflation, whilst Tuesday’s Jolts job openings data catalysed the brewing surge in yields.  

Roundabouts 

The Nasdaq rose 1.35%, the S&P up 0.8%, whilst the DAX added 0.1% and the FTSE declined 0.77%. This morning is seeing modest gains for Europe following a solid handover from Wall Street and Asia. Later we have weekly unemployment claims data from the US. Fed speakers include Barkin, Mester and Kashkari. All eyes though are on the nonfarm payrolls report tomorrow. The US 10yr sits at 4.75% from a 16-year high at 4.887%. S&P 500 futures– all about the 200-day moving average, which held yesterday. 4,350 looks to be the major resistance point. 

Yen Behind the Sun 

Among the volatility of Tuesday was a huge move in the yen – first to break 150 and then an abrupt reversal that to all the world looked like intervention by the Bank of Japan. The central bank has not yet owned this but it kind of doesn’t matter – the BoJ is losing control of the yield curve and we are seeing the messy normalisation – the BoJ is just behind the curve with its methods. Japan PM Fumio Kishida said “we must make the great wave of pay rises sustainable and spread it to the regions”. Hardly a sign they want inflation to come down.  

USDJPY – 21-day EMA is key support, MACD showing bearish 

Oil Spills 

Huge move lower for oil after setting a one-year high only last week – demand worries, underscored by a big jump in US gasoline inventories, suddenly trumping the supply deficit narrative. Brent and WTI both tumbled more than 5.6% for their biggest single-day declines since August of last year, touching the 200-day line. OPEC+ reaffirmed that Saudi Arabia and Russia will cut output by at least 1.3mn barrels a day until the end of the year. 

Gas and Gold  

In addition, gasoline stocks registered their biggest weekly build in two years – pointing to slackening demand in the US. Gasoline inventories added 6.5mn barrels for the week to September 29th. Prices firming up a touch this morning as risk catches a bit of a bid.  

Gold – showing some stabilisation as yields pare gains – 10yr TIPS back to 2.40% from 2.52% yesterday.