Nov 19 – What matters in U.S. and global markets today
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Even though the main U.S. index futures regained ground early on Wednesday, the VIX volatility gauge remained elevated above long-term averages and stuck at about 24. Crypto markets also remained on edge, with digital token Bitcoin limping back below $92,000 again after Tuesday’s bounce.
U.S. macro markets were more subdued by comparison. With a 20-year bond auction due later today, Treasuries caught something of a bid from Tuesday’s equity selling – but longer-term yields reversed most of that overnight.
Although futures markets now do not fully price another Federal Reserve rate cut until March, the release today of minutes from the Fed’s last meeting may give marginally more clarity about what has been read about a more hawkish turn.
But new jobless claims during that period were unchanged, which cut across speculation that the government shutdown led to an increase in layoffs.
Overseas bond markets were more restive on Wednesday, with Japan’s yen and Japanese government bond prices falling to new lows amid worries about loosening government fiscal policy and political pressure on the Bank of Japan to resist tightening monetary policy too much.
Yields on 10, 30 and 40-year JGB soared to new highs and the yen fell to its weakest against the dollar since January and a record low against the euro.
A sale of about 800 billion yen in 20-year JGBs by the Ministry of Finance had a bid-to-cover ratio of 3.28, down from the previous sale but around the average over the past year.
The market is nervous, however, about a ruling-party panel’s proposal on a supplementary budget exceeding 25 trillion yen ($160.86 billion) to fund Prime Minister Sanae Takaichi’s planned stimulus.
It also wary about pressure on the Bank of Japan to toe the line. BOJ Governor Kazuo Ueda met key government ministers on Wednesday, including Finance Minister Satsuki Katayama. Katayama said the meeting about maintaining “close coordination” between government and central bank and closely monitoring market with a “high sense of urgency”.
Today’s Market Minute
- Nvidia’s earnings report on Wednesday could trigger a $320 billion swing in the chipmaker’s market value — the largest post-earnings move ever for the AI giant — as investors seek signals about whether the artificial intelligence boom is accelerating or cooling.
- China has informed Japan that it will ban all imports of Japanese seafood, media outlets reported on Wednesday, in what appeared to be the latest salvo in an escalating diplomatic dispute between Asia’s top two economies.
- British consumer price inflation fell to 3.6% in October from September’s joint 18-month high of 3.8%, official figures showed on Wednesday, the first drop since May. Read Columbia Threadneedle Christopher Mahon’s piece for ROI on why inflation may fall faster than many expect.
- China’s steel production is falling this year, while iron ore imports look set to rise to a record high. While there are some fundamental factors that help explain the seeming head-scratching divergence, the main difference is probably sentiment, argues ROI Asia Commodities and Energy Columnist Clyde Russell.
- Warnings about Wall Street’s excessive optimism have fallen on deaf ears for most of this year, leaving market-watchers wondering what could cool the AI frenzy. ROI columnist Jamie McGeever writes that it could end up being a plain old-fashioned shift in the interest rate outlook.
Chart of the day
Just 26% of Americans say Trump is doing a good job at managing the cost of living, down from 29% in the prior poll. Some 65% of respondents – including one in three Republicans – disapprove of Trump’s performance on the cost of living.
Today’s events to watch
* US August trade balance (8:30 EDT)
* Federal Open Market Committee issues minutes (1:00 EDT)
* Federal Reserve Board Governor Stephen Miran, New York Fed President John Williams, Dallas Fed President Lorie Logan and Richmond Fed boss Thomas Barkin all speak
* US corporate earnings: Nvidia, Palo Alto Networks, Target, Lowe’s, TJX, Progressive, Williams-Sonoma
* US Treasury sells $16 billion of 20-year bonds
By Mike Dolan; Editing by Ed Osmond
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
