Equities ended Monday mixed, with growth-focused Nasdaq up from falling yields. The market was on edge until the 10-year yield breached 5%, only to reverse, taking the dollar down and letting counterparts get a boost. Meanwhile, UAW workers walked out of the Stelantis plant.
Chart: EURUSD
The 10-year yield rose to a 16-year high of 5.021% early Monday due to the ongoing “higher-for-longer” narrative, weighing on risk assets. However, it turned sharply following a tumble in oil prices. Easing inflation concerns boosted growth stocks ahead of earnings reports, sending Nasdaq to 14650 despite a volatile bond session. 14420 and 14760 remain critical for short-term price action.
Continuous talks between Israel and Hamas led to the release of two additional hostages to hold off a ground invasion of Gaza, leading to a 2.15% drop in oil prices to $86 a barrel. The commodity fell despite two of the largest oil and gas producers securing notable acquisitions as China refineries also saw inventory draws of about 240K bpd in September. $83.40/bbl is the next support, with resistance fixed at the weekly open of $87.90 for now.
Investors expect the European Central Bank (ECB) to pause due to economic stagnation but keep rates at or above current rates for longer. Meanwhile, consumer confidence in the EU fell by 10bps in October month-on-month but beat estimates of -18.3. Consumer sentiment stayed intact at -18.7. EUR/USD got a 0.70% boost from a bleeding dollar as fears of US government spending got out of hand. The pair captured $1.0669 and is poised to reclaim $1.07 unless bulls lose $1.0641.
The Bank of Japan (BOJ) conducted an unscheduled bond-buying operation for the 5th time since July in an overnight effort to curb rising yields. The recent surge in yields pressures the BOJ to consider raising the newly set cap, with growing speculation of a policy adjustment at its Oct 31 meeting. The announcement guided yen higher, easing USD/JPY to 149.49 in Tuesday’s session and exposing 149.31.