2023-10-10 10:03:31
Mike Dolan, US and Global Markets Specialist US stocks have weathered many headwinds over the past week – from soaring Treasury yields to the weekend shock in the Middle East – but they remain on board in the context of what the IMF considers to be the “remarkable” strength of the US economy.
With third-quarter earnings due to be released later this week, Wall Street stock indexes hit their highest level in nearly three weeks on Monday, following returning to early losses over the past two sessions. Stock futures are rising once more before the market closes today.
The initial jolt from the weekend’s attacks on Israel appeared to dissipate quickly, with oil prices stabilizing well below their recent highs. US crude oil held just above $86 a barrel on Tuesday, down almost 10% from the highs reached at the end of September and down 5% year-on-year.
When Treasury markets returned from the Columbus Day holiday on Monday to a week of large long-term debt auctions, they were also greeted by renewed optimism regarding the path of policy rates. the Federal Reserve.
Specifically, Dallas Fed boss Lorie Logan suggested that the recent tightening of bond markets may have done the Fed’s job and reduced the need for another policy rate hike. Fed futures tend to agree in this direction and now only forecast a one in four chance of a further rate hike. “If long-term interest rates remain high due to larger term premiums, there may be less need to raise the federal funds rate,” Mr. Logan said, referring to the growing risk premia linked to holding long-term Treasury bonds.
Fed Vice Chairman Philip Jefferson added: “I will remain mindful of tightening financial conditions through higher bond yields and will keep that in mind as I assess the future trajectory of policy.” .
Ten-year U.S. Treasury bond yields are expected to start Tuesday at around 4.65%, nearly a quarter of a percentage point below the peak just following Friday’s Treasury report. September job.
It is this exceptional economic strength of the United States that the International Monetary Fund highlighted in its latest World Economic Outlook, released at the annual meetings of the IMF and the World Bank in Marrakech on Tuesday.
While the IMF has lowered its growth forecasts for China and the euro zone, it has not changed its overall forecasts due to what it calls the “remarkable strength” of the American economy.
The Fund has revised its growth forecasts upwards for 2023 and 2024, by 0.3% and 0.5% respectively, to 2.1% and 1.5%.
China’s continuing difficulties have been amply illustrated by the latest worrying twist in the ongoing property crisis, which has led to a further fall in major stock benchmark indices.
Country Garden widened its losses and closed down more than 10% following the troubled property developer said it may not be able to meet all of its overseas payment obligations by the due date or within the corresponding grace periods.
Once once more, reports suggest that China’s fiscal policy response will be modest at best.
Bloomberg News reported Tuesday that Beijing is seeking to increase its budget deficit and plans to issue at least 1 trillion yuan ($137.1 billion) in additional sovereign debt to finance infrastructure spending.
The following-hours report, however, was enough to boost European infrastructure stocks, and the euro also benefited from a rise. The dollar has been easier more generally due to the Fed’s easing stance.
U.S.-listed shares of Chinese companies, including Alibaba Group Holding, JD.com and Baidu, rose 1.1% to 2.4% before the U.S. bell.
Elsewhere, PepsiCo edged up 0.8% ahead of the beverage maker’s third-quarter results and Unity jumped 6.4% following the video game software maker announced its CEO John Riccitiello would retire.
Key developments expected to drive U.S. markets later on Monday: * NFIB small business survey in September, wholesale sales and inventories in August, New York Fed survey on inflation expectations * World Bank and IMF annual meetings in Marrakech * Federal Reserve Governor Christopher Waller, Minneapolis Fed President Neel Kashkari, San Francisco Fed Chief Mary Daly and Federal Reserve Chief Atlanta Raphael Bostic all speak * The US Treasury auctions 3-year notes, 3 and 6-month bills * The results of American companies: PepsiCo
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