As we approach the final trading day of another quiet week in the global markets, there’s a notable shift in pressure dynamics, particularly in the bond markets. A significant retreat in long-term U.S. Treasury rates has provided some relief to investors across the Asia-Pacific region, resulting in a drop in bond yields from decade-high levels in Tokyo and Sydney.
Despite a recent sharp selloff on Wall Street, equities have shown resilience, offering European investors a glimmer of optimism. Japan’s Nikkei surged by 1.5%, closely followed by Hong Kong’s Hang Seng.
While the U.S. dollar remains dominant, the Japanese yen has rebounded from a one-year low, and the euro has displayed signs of recovery following the European Central Bank’s cautious approach to its hiking cycle, often described as “inaction is action.”
Friday’s positive market sentiment provides a brief respite, as the upcoming week promises potential volatility. Investors will closely monitor consecutive policy decisions from the Bank of Japan, the U.S. Federal Reserve, and the Bank of England.
The ECB has heightened expectations that tightening measures in the U.S. and the U.K. have peaked, potentially making the BOJ’s announcement in Japan a key event to watch. Interestingly, the BOJ’s announcement coincides with Halloween, and the recent weakening of the yen and rising yields have sparked speculation about a potentially hawkish policy adjustment.
While European economic data remains limited, European Central Bank President Christine Lagarde will have the opportunity to address the Euro Summit in Brussels.
In the United States, the release of the Personal Consumption Expenditures (PCE) deflator, one of the Federal Reserve’s preferred inflation gauges, will provide insights into the nation’s economic health. Additionally, financial results from major oil companies, Exxon and Chevron, will be closely watched.
In the realm of geopolitics, China’s foreign minister, Wang Yi, continues his highly anticipated visit to Washington. This visit comes at a time of sudden and saddening news in China, as former Premier Li Keqiang passed away from a heart attack at the age of 68. This unfortunate event occurred only 10 months after his retirement from a decade-long tenure as premier.
