On Monday 1st October, the auction of three- and six-months treasury bills took place. The former have been issued with an average yield of 2.175% against 2.18% of the previous sitting while six-months have been issued averagely at 2.335% compared to 2.32%.
Wednesday the EIA published data about WTI stock, which increased by 7.975M barrel compared to 1.985M expected. The same day, the Fed’s chairman Jerome Powell said US economy has a “remarkably positive outlook” and that they will continue to hike gradually interest rates. The news has been perceived negatively by dealers that have started to sell Treasuries: the 10y T-bond has skyrocketed during the day from 3.05% to 3.18%. On Friday it reached 3.25%, level reached the last time on 2011.
Such news has been perceived as negative from US stock investors leading the S&P500 index to make a -0.8% return falling to 2,888.54 (from 2,913.98). At the same time, Nasdaq fell 3.05% to 7,800.37 (from 8,046.35). Investors are feeling uncertain about overweighting US equities and might fly to other “cheaper” foreign equities.
On Friday authorities have published data about unemployment rate: in US it is the first time for 49 years that it is at 3.7%. The result confirmed the previous comments of Fed’s chairman Jerome Powell.
On Wednesday, Prime Minister Theresa May spoke at the Conservative Party Conference. She addressed interventions on NHS and house ownership as the end of austerity policies moves closer. The FTSE 100 index lost 2.55% week over week, closing at 7318.54, while the Pound gained 0.71% against the dollar.
On Monday, the President of the European Commission Juncker commented on the proposed Italian budget saying that “we have to do everything to avoid a new Greece – this time an Italy – crisis”. The Italian Deputy Prime Minister Di Maio answered that the Government will not recede from the 2.4% budget deficit target. Italian equity and bond prices fell after the declarations, to recover after that local media pointed to a reduction in the budget deficit in the following years.
European stocks decreased over the week, with DAX closing -1.10%, CAC 40 closing -2.44%, FTSE MIB closing -1.77% and the EuroNext100 closing -2.08%. Euro closed at 1.152$, lower from last week 1.1609$.
India: Friday, the Reserve Bank of India released interest rates decisions data: the Interest Rate is fixed at 6.50% against 6.75% expected while the Reserve REPO Rate at 6.25% compared to 6.50% expected. Such decision of not raising rates has caused investors to sell Indian Rupees that over the week made 1.15% depreciation to a USD/INR of 73.77.
Japan: On Tuesday took place the 10-Year JGB Auction that have been issued with an average yield of 0.14%. During the week, the Nikkei 225 made a -1.39% return ending on Friday at 23,783.72
Thursday, Japanese authorities announced that the purchase of Foreign Bonds decreased from 1503.0B to 379.9B and on Friday they declared that the amount of foreign reserve has remained steady at 1259.7B
China: Exchange were closed for the whole week for the National Holiday, so the USD/CNY On-shore trade was closed, and the Off-shore fluctuated between 6.86$/Yuan and 6.87$/Yuan. We will need to see on which level the Chinese government will decide to fix the On-shore rate on Monday, either pushing towards depreciation or appreciation.
Brazil: On Sunday 7 October will take place the Presidential election where the “populist” leader Jair Bolsonaro is first in the polls. If you are interested in the Brazilian election, check the other article by BSIC: “Brazil’s “Real” Struggle: what’s next?”.