Following a deal to prevent a government shutdown in the US that was reached over the weekend, US market futures rose along with Asian shares. Investors are anticipating Federal Reserve Chairman Jerome Powell’s remarks for any indications of how much further rate increases are necessary.
After US senators late on Saturday passed compromise legislation to keep the government functioning until November 17, futures contracts on the S&P 500 soared higher on Monday. While many Asian markets, including China and South Korea, were closed for holidays, Japanese equities increased.
Investors also felt some relief as statistics released over the weekend revealed that manufacturing activity in China increased for the first time in six months, adding to indications that some sectors of the country’s economy are regaining their footing. Exports from South Korea showed a slower drop.
There is some comfort because financial markets were preparing for a closure, but it only temporarily removes one of the clouds now over the markets, according to Yung-Yu Ma, chief investment officer at BMO Wealth Management. Over the next two weeks, “interest rates and Fed hawkishness remain the name of the game and the main driver of the markets.”
While the US deal is giving the markets some solace, attention will soon turn to Powell when he talks in a conversation later on Monday. This week will also focus on US manufacturing activity and employment data after the chairman of the New York Fed suggested on Friday that policymakers should maintain high interest rates for a while.
Vasu Menon, managing director of investment strategy at Oversea-Chinese Banking Corp., predicted that the US economy would experience a slowdown and a recession in the first half of 2024 as a result of “higher-for-longer rates, tighter fiscal policy going forward, and the higher bond yields, at least in the short term.”
The strength of the dollar was roughly unchanged. The 10-year yield increased by four basis points to 4.61% as Treasury yields increased throughout the curve. The five-year yield increased by a comparable amount to 4.66%, approaching a 16-year high once more.
On Wednesday, the Bank of Japan made the announcement that it would carry out additional government bond purchase operations. The futures on 10-year bonds reduced losses.
After Japan’s quarterly Tankan survey revealed that large manufacturers’ confidence increased more than anticipated, and a summary of the central bank’s policy meeting last month revealed signs that officials were more optimistic about considering changing policy, government bonds earlier fell and stocks rose.
In the meantime, stock price increases on the first trading day of October may have temporarily stopped the turmoil that has gripped the world’s financial markets. Since September 2022, the July to September quarter saw elevated interest rates make it the worst for MSCI’s all-country market index, and rising oil prices added to concerns about inflation and sluggish economic growth.
China has a weeklong vacation.
Monday’s monetary policy speech by Bank of England official Catherine Mann
Monday’s roundtable conversation included Philadelphia Fed President Patrick Harker and Fed Chair Jerome Powell.
Monday’s session on climate risk will be moderated by New York Fed President John Williams.
On Monday, Cleveland Fed President Loretta Mester will discuss the economy.
Monday’s US ISM manufacturing index
Tuesday’s rate decision for Australia
Raphael Bostic, president of the Atlanta Federal Reserve, discusses the economy and inflation on Tuesday.
Tuesday’s US JOLTS report for August
Wednesday’s Eurozone services and composite PMIs
Christine Lagarde, president of the ECB, delivers the opening remarks on Wednesday.
Wednesday’s US ISM services index
Thursday’s industrial production in France
Thursday’s panel discussion included BOE Deputy Governor Ben Broadbent and Riksbank First Deputy Governor Anna Breman.
Mary Daly, president of the San Francisco Fed, speaks on Thursday at the Economic Club of New York.
Friday industrial orders from Germany
US nonfarm payrolls for September, due Friday
Several significant market changes include:
Stocks
As of 1:17 PM Tokyo time, S&P 500 futures were up 0.6%. On Friday, the S&P 500 decreased 0.3%.
Futures for the Nasdaq 100 gained 0.8%. Little changed on the Nasdaq 100 index.
Topix index in Japan increased by 0.4%.
S&P/ASX 200 Index for Australia dropped 0.2%.
Currencies
Little changed in the Bloomberg Dollar Spot Index.
At $1.0570, the euro had scarcely changed.
Japanese yen decreased by 0.3% to 149.79 per dollar.
To 7.3042 per dollar, the offshore yuan decreased by 0.2%.
To $0.6410, the Australian dollar decreased by 0.4%.
Cryptocurrencies
To $28,073.26 it increased by 3.5%.
To $1,727.6 ether increased by 3.2%.
Bonds
The 10-year Treasury yield increased by four basis points to 4.61%.
The 10-year yield in Japan increased by one basis point to 0.775%.
The 10-year yield in Australia increased by three basis points to 4.49%.
Commodities
To $91.08 per barrel, West Texas Intermediate crude increased by 0.3%.
To $1,844.30 per ounce, spot gold decreased by 0.2%.
Bloomberg Automation provided assistance in the creation of this article.
–With the help of Joanna Ossinger and Matthew Burgess.
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