Headlines:
- European stocks slip back as oil and bond yields edge higher from session lows
- Gold extends the recovery amid renewed US-Iran deal hopes and dovish Fed’s Williams comments
- French inflation jumps in September as HICP rises to 3.4%
- German state CPI readings point to inflation climbing back above 3% in September
- Germany retail sales rebound 1.3% in August after July slump
- German import prices jump 1.0% in August as cost pressures build
- Italy September preliminary CPI +4.2% vs +3.8% y/y expected
- Bitcoin remains stuck in a range as US-Iran talks cap gains despite Fed’s Williams support
- Month-end FX flows could add to volatility with quarter-end rebalancing also in play
Markets:
- WTI crude up 1.5% to $90.72
- 10-year Treasury yields down 1.9 bps to 5.236%
- Gold flat at $4,179
- GBP leads, AUD lags on the day
- European equities mostly lower; S&P 500 futures -0.1%
- Bitcoin up 0.3% to $83,834
The session started with broader markets catching a bit of a breather, as oil prices and bond yields came off the boil.
Oil fell in overnight trading after the US offered to release up to 40 million barrels from the SPR. Meanwhile, bond yields cooled after Fed policymaker Williams toned down hawkish expectations over the central bank’s tightening steps in saying that there is “no need for urgency” following the September rate hike.
WTI crude fell to a low of $88.60 earlier today but is now bouncing back to trade at $90.72, up 1.5% on the day. 10-year Treasury yields have also rebounded from lows near 5.20% to move just above 5.23%, though they remain well below the overnight high of 5.29%.
The rebound in both oil prices and bond yields is now tempering the broader market mood, as European stocks are falling back after the positive open today.
Regional stocks opened with modest gains but have reversed all of the advance with the DAX now falling by 0.2% and CAC 40 down by 0.5%. It was the same story for US futures, which began the session with a steadier mood before posting slight declines now ahead of the Wall Street open later.
In the major currencies space, the dollar is failing to build on the gains from earlier this week though. That suggests a more mixed mood, with the greenback holding slightly weaker today instead. EUR/USD is up 0.1% to 1.1355 and USD/JPY down 0.1% to 157.10 on the day. Meanwhile, GBP/USD is up 0.4% to 1.3285 in climbing to its highest levels in a week.
Just keep in mind though that month-end and quarter-end flows might be in play here, though the price movements seem to be somewhat contradictory to what BofA’s model suggests here. That being said, do be reminded that month-end predictions should not be treated as hard directional calls. These flows are notoriously difficult to pin down and tend to take on more importance as we get closer to the fix itself.
Besides that, gold is trading more flat as the earlier bounce towards $4,200 fizzles. The precious metal is now lightly changed at $4,179 on the day.
As we look to round off September trading, all eyes will stay on oil prices and the bond market still. Treasury yields will be back in focus later with the US PCE price index, and another push higher could quickly put the pressure back on risk trades before month-end.
This article was written by Justin Low at investinglive.com.