The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1037 GMT - Euro credit spreads are likely to become more volatile around Tuesday's U.S. elections, UniCredit Research analysts say in a note. "The U.S. election will be the main driver, by far, of credit spreads this week," they say. Credit spreads widened last week as investors exercised caution ahead of the U.S. elections as well as U.S. and U.K. central bank interest-rate decisions Thursday. At market close Friday, euro-denomincated senior bank credit spreads were 12 basis points wider than their October lows, the analysts say. (miriam.mukuru@wsj.com)
1006 GMT - The Bank of England's staff assessment of the new Labour government's budget could support sterling slightly, Monex analysts say in a note. The assessment will likely hint that the higher spending planned in the budget will require a "marginally slower" pace of interest-rate cuts, they say. This should be positive for sterling, albeit at the margin. The BOE is expected to cut the bank rate by 25 basis points on Thursday. Tuesday's U.S. election is unlikely to prevent the BOE from offering any concrete forward guidance, Monex analysts say. (emese.bartha@wsj.com)
0935 GMT - DNB Markets expects the Riksbank to cut its key policy rate by 50 basis points this week as recent data show no signs of economic recovery, neither in the labor market nor in economic growth. At the last meeting in September, the Riksbank expressed increased concern about real economic developments while underlying inflation is still expected to stabilize around the 2% target, DNB says. The central bank opened up the possibility of a 50 basis-point cut before year-end and markets have largely discounted the cut happening at Thursday's meeting, it says. (dominic.chopping@wsj.com)
0913 GMT - Gold is edging lower in early European trade as markets exercise caution ahead of a busy week between the U.S. presidential election and the Federal Reserve's monetary policy decision. Futures trade 0.2% lower at $2,743.00 a troy ounce, but are still up nearly 3% on the month and more than 30% year-to-date. Uncertainty around the election outcome--with the latest opinion polls showing a neck-and-neck race between Vice President Harris and former President Trump--has stoked demand for the safe-haven asset in recent days. Meanwhile, traders expect the Fed to cut rates by 25 basis points, making gold more appealing. Still, "while long term drivers for gold remain in place, a pause or shallow rate cuts will provide reason for investors to book profit after the recent price rally," ANZ Research analysts say in a note. (giulia.petroni@wsj.com)
0905 GMT - Yields on U.K. government bonds, or gilts, fall as investors await the outcome of the U.S. elections on Tuesday. Focus is also on the Bank of England interest-rate decision on Thursday where a 25 basis-point rate cut is widely expected. Monex Europe say the pace of rate reductions after Thursday remains uncertain and the BOE could point to a gradual pace. "Risks look skewed towards an easing pace of once per quarter when considering the recent U.K. budget announcements." The 10-year gilt yield falls around 2 basis points to 4.441%, Tradeweb data show. The 2-year gilt yield declines 3 basis points to 4.414%. (miriam.mukuru@wsj.com)
0856 GMT - Sweden's Riksbank is likely to cut its key policy rate by 50 basis points to 2.75% on Thursday as inflation is under control and policymakers are keen to quickly support the country's fragile economy, Nordea says. The central bank's guidance in September highlighted 50 basis points as an option at upcoming meetings. "The weak krona means that the Riksbank is unlikely to open the door ajar for a 50 basis-point cut also in December, which otherwise could have been on the agenda," Nordea chief analyst Torbjorn Isaksson says. Nordea expects a 50 basis point cut this week, followed by a 25 basis-point cut in December, with the policy rate bottoming at 2.00% in the second quarter of 2025. (dominic.chopping@wsj.com)
0851 GMT - China's NPC Standing Committee meeting this week is unlikely to fully address market concerns over the country's economy, OCBC analysts write in a note. One potential surprise could be domestic consumption as the finance ministry's briefing in October didn't place much emphasis on this topic. In addition, if Trump wins the U.S. presidential election, China could step up fiscal stimulus measures to counteract a potential 60% tariff on Chinese products, OCBC says. Investors should watch China's central economic work conference in December for guidance on the policy tone for next year, OCBC adds. In the near term, markets are likely to focus on fundamentals while assessing the impact of potential fiscal stimulus and the U.S. election results, which may lead to market volatility, OCBC says. (jiahui.huang@wsj.com; @ivy_jiahuihuang)
0841 GMT - The Turkish lira steadies against the U.S. dollar after S&P Global Ratings upgraded Turkey's credit rating to BB- from B+ with a stable outlook. The ratings firm praised the Turkish central bank's tight grip on monetary policy. "The Central Bank of the Republic of Turkiye's tight monetary stance has enabled Turkish authorities to stabilize the lira, bring down inflation, rebuild reserves, and de-dollarize the financial system," it said in Friday's rating review. USD/TRY is steady on the day at 34.3468, having risen as high as 34.4249 on Friday, according to FactSet data. (emese.bartha@wsj.com)
0814 GMT - The U.S. dollar falls as a major week looms for the economy. The U.S. is heading into presidential elections on Tuesday, while the Federal Reserves decides on interest rates on Thursday. "[The] U.S. dollar shrugs off poor nonfarm payrolls, but suffers from election polls," FX analysts at Commerzbank Reserch say in a note. A well-respected poll put Democrat Kamala Harris ahead of Republican Donald Trump in Iowa, a state which is usually Republican-leaning, increasing uncertainty regarding the election result. Friday's U.S. jobs data were well below forecasts, hit by one-off weather events and strikes. The DXY index falls 0.5% to 103.757, having earlier hit a two-week low of 103.630. (emese.bartha@wsj.com)
0726 GMT - There is some more room for final positioning ahead of Tuesday's U.S. presidential election, with almost all market participants squarely focused on the event, says Pepperstone's Michael Brown. "Some further hedging, de-risking, and position squaring could well be seen as election day looms large," the senior research strategist says in a note. In the U.S. Treasury market, Monday's $58 billion 3-year note auction could be of interest, he says. The issuance could get attention particularly after last week's 2- and 5-year sales both notched sizeable tails, Brown says. The 10-year U.S. Treasury note yield is trading at 4.313%, down 5 basis points from Friday, according to Tradeweb. The 10-year German Bund yield is down almost 2 bps at 2.385%, according to Tradeweb. (emese.bartha@wsj.com)
0722 GMT - The main goal for investors amid the U.S. election should be building situational awareness and avoiding overconfidence about the outcome and market impact, says Morgan Stanley strategist Michael D Zezas. Investors could benefit from adjusting expectations. The increase in the prediction market-implied probability of a Republican win has some anticipating a clear election night result, he says. MS considers this possible but not the most likely scenario. Neither candidate appears to be a clear favorite to win the electoral college, and a repeat of 2020's long vote count is plausible. MS is not placing much weight in early voting data, given its poor track record, and advises not reading too much into near-term market moves. Short-term election reactions tend to be noisy and may not be indicative of medium-term trends, it says. (fabiana.negrinochoa@wsj.com)
0722 GMT - South Korea's benchmark Kospi rose 1.8% to close at 2588.97, led by airline and semiconductor stocks. Foreign and institutional investors were net buyers. Budget carriers Jeju Air and Jin Air rose 5.1% and 5.4%, respectively, after China offered to extend its visa-free policy to nine more countries, including South Korea. Memory-chip maker SK Hynix climbed 6.5% after announcing its development of the industry's first 16-layer high-bandwidth memory product. USD/KRW settled 0.6% lower at 1,370.90 in Seoul onshore trading. The South Korean 10-year government bond yield was up 0.7 bp at 3.097%. (kwanwoo.jun@wsj.com)
(END) Dow Jones Newswires
November 04, 2024 05:37 ET (10:37 GMT)
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