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Asia & Europe recover slightly; U.S. equities mixed; High bond yields remain in focus, after cooling slightly yesterday, the rise seems to continue

Olusegun Enujowo

Analyst

European stocks find a fragile footing after three straight days of losses, thanks to Wall Street's bounce back. However, Europe's Stoxx 600 only show slight gain (currently + 0.3%), showing continued caution in the market. This modest climb came despite the S&P 500’s significant gain, its largest in nearly three weeks. European construction PMI also came in slightly higher with the exception from Germany posting lower than expected PMI numbers (39.3 vs 41.5 prior).  

US stocks closed higher on Wednesday with the US100 (+1.35%), US500 (+0.81%), and US30 (+0.38%), closing with gains. Wall Street's rebound was influenced by weaker-than-expected US job additions and a slight pullback in the services sector, pushing traders to reduce bets on a Fed rate hike. Yields cooled down yesterday, but the the cooling seems temporary with US Treasury yields trading flat in today's pre-market. Now, the chances of a November rate rise are perceived as near 25%, a decrease from one-in-three prior to this data release.

 Despite the hint of optimism, global markets grapple to regain lost ground. A massive selloff previously erased trillions from global equities and bonds, mainly due to concerns about how much higher the US interest rates could go. The focus now shifts to Friday's monthly payrolls, which may indicate the state of the labor market. But before that, investors await the weekly jobless figures set to release later today (12:30 UTC+0).The ADP payrolls data, which came in weaker than expected yesterday, has not been a reliable predictor of the more important NFP data in recent months.

 In Asia, the mood was cautiously upbeat. Japan’s Topix Index saw a robust recovery, posting its best performance since November 2022. Meanwhile, Hong Kong advanced by 0.61%, inspired by Wall Street’s rebound and an improved economic forecast for China. 

On the currency front, the USD remained steady against its Group-of-10 counterparts. However, the JPY saw a strengthening of 0.6% following a previous drop that sparked market speculations about potential interventions by Japanese authorities.

 Commodity markets search for direction. Oil prices try to stabilize after a significant 5.6% drop (US Crude) on Wednesday. WTI crude futures hovered above $84 per barrell; OPEC+ maintained its existing production cuts. The global outlook remains tentative with investors eyeing further data releases and central bank actions. Gold prices found shaky support from the dip in bond yields and is now trading at around $1,820/oz .

Key events today:

AUD  Balance of Trade - 00:30 UTC+0 (released)

EUR   Balance of Trade - 06:00 UTC+0 (released)

EUR   Construction PMI - 07:30 UTC+0 (released)

CAD  Balance of Trade - 12:30 UTC+0

USD  Balance of Trade, Initial Jobless Claims - 12:30 UTC+0

CAD  Ivey PMI - 14:00 UTC+0

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