Market News

FUNDAMENTAL OVERVIEW

Gold briefly spiked below the 4,110 support yesterday, although there was no clear catalyst behind the move. It may have simply been a case of stops being triggered after the price pierced the support level. Nevertheless, the losses were quickly erased, and gold is now trading back above 4,110.

The bias remains neutral to bearish given the lack of any meaningful improvement in the fundamental picture. Gold could come under renewed pressure in the coming days as oil prices have been steadily rising following reports from The Atlantic that the White House asked the Pentagon to develop military options for strikes against Iranian targets, potentially before…

European stocks are kick starting the day with sharp losses across the board, as the market selloff continues to gather pace amid mounting pressure from the bond market mostly. The opening changes are as follows:

• Eurostoxx -1.3%
• Germany DAX -1.0%
• France CAC 40 -0.9%
• UK FTSE -0.8%
• Spain IBEX -1.0%
• Italy FTSE MIB -1.4%

There isn't much to cheer about when looking at the above changes, with Italy leading the declines and all major indices falling by at least 0.8%. The broader risk mood remains relatively fragile as investors continue to grapple with the fallout from the global bond market selloff.

10-year Treasury yields continue to hover near multi-decade highs, holding around 5.32% today, while European borrowing costs are also facing upward…

When the dollar flexes its muscles, the pain doesn't necessarily just stay confined to the FX market. And I reckon we're starting to see emerging economies in Asia get a rather uncomfortable reminder of that.

With 10-year Treasury yields hovering around 5.30% and the dollar running up to a near 18-month high, investors have good reason to favour US assets at this juncture. It's a simple response to the question of why bother taking additional risks elsewhere when US government debt is paying such lucrative returns?

And that is where the problem begins to grow. Money moving towards the US often means money moving away from emerging markets. And for countries like Thailand and Indonesia, they are finding themselves caught in the middle.

The…

There are a couple of expiry levels to take note of on the day, as highlighted in bold below.

The first one is for EUR/USD at the 1.1150 level, which sits just a little over 50 pips below the spot price. The expiry level in itself is not anything major, with the size just decently relevant and not really tying to any technical significance either. But it is the only one that is keeping close by, with the standout €5.7 billion in expiries at 1.1300 quite some distance away.

That makes the expiries at 1.1150 the more relevant one to watch still, particularly if dollar continues to strengthen and EUR/USD drifts lower in the session ahead. That could see some choppier price action closer to the expiry level ahead of the cut.

Besides that, there…

With long-end Treasury yields surging to multi-decade highs, it is easy to pin much of the recent struggles in EUR/USD on a stronger greenback. But what if the euro is also starting to develop a weakness story of its own? I reckon what is happening with EUR/GBP is offering traders another clue to that.

The pair has been under sustained pressure in recent weeks, having fallen to its lowest levels since June last year. And with France's fiscal troubles continuing to unsettle European bond markets, it is getting more and more difficult to ignore the possibility that traders are starting to price in more euro-specific risks into the equation.

We already got a good hint of that with EUR/CHF emerging as another pressure gauge for Europe's fiscal…

When you see bond yields start climbing, what exactly is the first thing that comes to mind? Interest rates? Inflation? Risk aversion? I can certainly bet that it isn't your next trip to the supermarket.

After all, what exactly do 10-year bond yields have to do with the price of groceries? Well, perhaps more than you might think.

Let's take an example of a government that needs to borrow $100 billion to finance its spending. They have to pay an interest rate of 3%, so that works out to $3 billion in annual interest payments in theory. That sounds simple enough, no?

But what happens if the same government has to then borrow the same amount at 5% interest? The bill suddenly rises to $5 billion instead. That is an extra $2 billion a year just…

• Samsung profit tops 100 trillion won for first time, but shares slip
• Gold rebounds from two-month low, but Pepperstone says $4,275 break needed
• Japan's answer to FedWatch: TFX launches BoJ meeting-by-meeting rate futures
• China bucks global bond rout as 10-year yield touches 1.7%
• PBOC sets USD/ CNY reference rate for today at 6.7367 (vs. estimate at 6.7254)
• Ethereum researchers urge crypto holders to prepare for AI-driven threats to wallet security
• Chevron and Shell shut in output at nine US Gulf facilities as storm Isaias nears
• Is Japan overtaking the US in crypto? The law, the tax cut and the gap, what to watch.
• UBS sees S&P 500 at 8,400 by June as AI and earnings extend record rally
• Axios: Pentagon orders readiness for possible Iran strikes as…

Samsung's result confirms that AI-driven memory demand remains intact, which supports the case for SK Hynix and Micron, but the muted share reaction shows how much good news is already priced into the sector. With memory price increases slowing and a stronger won eroding the value of overseas earnings, investors are likely to focus less on headline records and more on pricing and high-bandwidth memory momentum when divisional results come later this month. As one of the heaviest weights in South Korea's Kospi, Samsung's performance after the beat will shape local equity sentiment and foreign flows. Weakness in its consumer businesses also highlights how narrowly the gains are concentrated in chips.

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Samsung just earned more in one quarter…

Gold's bounce looks more like relief from a stalling dollar than a change in trend, and the $4,275 level flagged by Pepperstone is the line traders will watch for confirmation. The bigger swing factor is how bond markets behave: if rising long-dated yields are read as a sign of fiscal and credit strain rather than economic strength, the metal could break its link with real yields and regain its haven bid. Escalation in the Middle East has so far hurt gold through higher oil, inflation and rate expectations, so reports of possible renewed US strikes on Iran may weigh on bullion rather than support it unless they trigger broader risk aversion. The reopening of Shanghai trading after Golden Week adds a test of Chinese physical demand.

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Gold…

A liquid meeting-by-meeting contract would give the yen market something it has lacked: a clear, quotable read on the odds of a BoJ hike at each decision. That could make yen moves around BoJ meetings more orderly, as surprises get priced earlier, while sharpening reactions to data and official comments between meetings. Easier hedging of short-term rate risk may also support activity in front-end Japanese government bonds and yen carry trades, where the cost of being caught out by a hike has risen. Liquidity is the key test: a thinly traded contract will produce noisy signals rather than reliable odds.

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Japan is finally getting its own version of the tool Wall Street uses to bet on Fed decisions, and the BoJ's quickening hiking cycle…

A gap of more than 3.5 percentage points between Chinese and US 10-year yields keeps downward pressure on the yuan and makes the currency attractive to borrow for carry trades, leaving the People's Bank of China leaning on capital controls and its daily fixing to contain weakness. Central bank buying signals that Beijing is comfortable with low rates, so a policy-driven reversal in Chinese bonds looks unlikely while the domestic economy remains soft. For global markets, China is exporting disinflation rather than adding to the yield surge, and its banks' appetite for government debt shows how little demand there is for credit. Any sign that savings are rotating from bonds into equities would be an important shift for mainland stocks.

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• <a href="https://investinglive.com/stock-market-update/china-markets-reopen-after-golden-week-five-things-to-watch-for-stocks-and-gold" target="_blank"…

Earlier:

• CICC sees strong A-share start after Golden Week: three reasons for optimism
• China markets reopen after Golden Week: five things to watch for stocks and gold

more to come