General Market Analysis – 22/10/24

US Stocks Fall from Record Levels – Dow down 0.8%

US stock markets fell from record levels yesterday as investors focused on key earnings reports and the market priced in a more dovish Federal Reserve. The Dow dropped 0.78%, the S&P fell 0.17%, while the Nasdaq bucked the trend, rising 0.27% as Nvidia closed at a record high. Treasury yields pushed higher, hitting a 12-week peak, with the 2-year gaining 7 basis points to reach 4.025% and the 10-year benchmark climbing 10.5 basis points to close at 4.180%. The dollar also strengthened, with the USD/JPY notably surpassing the key 150.00 level, and the DXY index rising 0.5% to 103.98. Oil prices regained some of last week’s 7% losses, with Brent climbing 1.68% to $74.29 and WTI increasing 1.94% to $70.56 per barrel, while gold remained flat after reaching a new record high at $2,740.37.

Yen in Focus Again for FX Traders

The yen is once again the focus for FX traders as geopolitical factors overshadow the current underlying fundamentals. The USD/JPY surged through the key psychological level of 150 yesterday, hitting a new monthly high of 150.88, a level not seen since late July. The upcoming US election is having a growing impact on markets, with “Trump trades” gaining traction in recent weeks as the race remains neck-and-neck. Some traders believe either political outcome will likely bring further inflationary pressures to the US economy, boosting the dollar. However, most agree that a Republican victory would lead to a more significant market shift.

Central Bankers in Focus Today for Markets

Geopolitics is expected to play a major role in market movements today as investors react to potential US election outcomes and focus on various central bank updates in the days ahead. While there is little economic data on the calendar for the next three trading sessions, key speeches from central bankers will take centre stage. The BRICS summit in Kazan, Russia, begins today, with emerging market traders closely monitoring any developments. Later in the US session, attention will shift to speeches from prominent figures, including Bank of England Governor Andrew Bailey and ECB President Christine Lagarde. The latest Richmond Manufacturing Index data is also due for release, though central bank commentary is likely to overshadow it.

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