Asian equities rallied yesterday led by Hong Kong, which gained over 3% after another selloff in the first week of the month. The rally continued into Europe, with debt joining equities in significant moves higher. Most developed and Emerging Market currencies were bid against the US Dollar and FX vol was notably lower from the prior day's levels. The positive risk sentiment spilt over into the US session. This was as SPX opened higher following the news around the vote on the deferment of the debt ceiling until December. The index traded mostly sideways and closed marginally below the 4,400 level with all sectors in the green except Utilities. Close the 80% of the index constituents traded up on the day in a strong showing.
Some of the prior session's selloff in Crude and Natural gas was reversed as the US Department of Energy confirmed it had no imminent plans to release any part of the strategic reserves. Europe's demand for natural gas is also likely to be met by increased output from Gazprom. Commodities enjoyed another day in the green, in what is turning out to be a great week for the usually unloved asset class. Gold remains range-bound but Palladium did see a 3.8% move higher overnight. Crypto was mixed as Bitcoin fell back to the 55k support but Ethereum moved ahead to the 3.6k level now.Ahead today, the main event will be the US NFP number for September. Expectations here are of 500k jobs added in the month and the unemployment rate ticking lower to 5.1% from 5.2% earlier. Given the steady downtrend in weekly jobless numbers overnight, this looks likely to be met. The tapering of the Fed's asset purchases is set to commence later in the year. With the move higher in US yields overnight, this looks to be the consensus expectation for now. The US 10Y moved up 5 bps to around the 1.58% level. We also have a rate decision from the RBI where a hold at 4% is expected for the eighth straight meeting, given inflation is within the 4-6% target range.
October 8, 2021
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