Global markets adjust to Fed expectations
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Why are equity markets falling as Fed rate‑cut expectations change?
Well, remember that US soft landing that we were talking about? Well maybe that was a little premature because equity markets are down now as markets reprice their expectations for cuts from the Fed. And Australia feeling some of that as well, and some of the risk off from the events in the Middle East too, as we wait to see what happens next there. And what could be today a very important day for China as well. It's Tuesday, it's the eighth of October twenty twenty four. It's the morning call from NAB. Good morning. Well, a slight fall in the US dollar, a naught point six percent fall in the Australian dollar down to sixty seven and a half US cents, a quarter percent fall in the pound, but not much movement in the euro.
So the rises have been the Japanese yen, which is up half a percent, the Swiss franc, which is up half a percent as well. That sounds a bit risk off, doesn't it? And we're seeing that in US equities as well. They were already down by quite a bit, but that got worse after a judge towards the end of the session ruled the That Alphabet must lift restrictions that prevent developers from setting up rival marketplaces that compete with its own Google Play Store. So since then we've seen prices down even further. The close in New York, a 0.9% fall in the Dow, the same for the SP, and a 1.2% fall in the Nasdaq. But shares are up in Europe, up 0.3% for the Eurostocks 50 at close, up half percent for the CatCarant, 0.3% for the FTSE 100%.
The DAX is down a little bit. We've also got a big increase in oil. WTI is up three point two percent. Brent up to three point three percent. Brent now well over eighty a barrel. And bond yields higher again, up five basis points for ten year treasuries, now up to four point zero two percent, up eight basis points in the UK, up to four point two one percent. Aussie ten years, well they're up a couple of basis points on futures overnight, but big moves yesterday, so now at four point two two percent. That's a fifteen basis point rise over the last twenty four hours.
How are currency fluctuations reflecting the current risk‑off sentiment?
So let's look at all of that with Nabs Rodrigo Catrill. So treasury yields over four percent for the first time since August. So m markets are listening to the Fed now it seems, and equity markets not so excited about the future. Mm
No, um morning Phil. Um yes, uh so um you know when you you look at the the breakdown of the moving ten year treasure yields and um and you look at the break even and then you also look at the real yields. Is it it's interesting to know that really the the the the whole move has been driven by uh by the inflation expectations component. Um And then you plot that against oil prices and and you get the same charts. So um whilst there's two things going on here. One uh is the repricing of the Fed and then we've seen a couple of basis points taken out now for uh the next meeting November and around five basis points taken out uh for um for the cumulative pricing to to to uh for December. So so there has been a repricing or or rather there's been an extension of that repricing in terms of pooling or taking out
um Fed rate cut expectations after North Fund payrolls. Um but at the same time you also have had this this uplift in in oil prices which has been quite significant. Um And then we've seen uh the break even. Or inflation expectations in the US also tick higher along along that rise in prices. So it's probably worth emphasising that there's two drivers here in terms of the moving yields uh in the in the US and and certainly um a a lot more focus in terms of what's going on in the Middle East. Well
yeah, but w how long f were those oil prices gonna stay up for? 'Cause I mean we often hear, you know, there's a there's an instant reaction to any crisis and then it seems to calm down a little bit, but you know, certainly the situation in the Middle East isn't going to calm down in a hurry.
Well, I I think that, you know, uh everybody's ev ever since President Biden made that comment that um Israeli very think twice Israel very very think twice about bombing any oil fields.
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Chapters
8 chapters
1
Why are equity markets falling as Fed rate‑cut expectations change?
0:01–1:48
2
How are currency fluctuations reflecting the current risk‑off sentiment?
1:48–3:59
3
What is driving the recent rise in US and Australian bond yields?
3:59–5:59
4
How is the Middle‑East conflict influencing oil prices and market risk?
5:59–8:04
5
Why are investors repricing Fed cuts after the latest payroll data?
8:04–10:23
6
What factors are causing the Australian dollar to weaken despite rate differentials?
10:23–12:30
7
What could China’s post‑Golden Week fiscal plans mean for global markets?
12:30–14:19
8
How are weak German factory orders affecting ECB rate‑cut expectations?
14:19–15:45