Market Update – October 19 – Stock markets pressured, as bond yields rise

Stock markets have remained underwater through the Asian part of the session, and European as well as US futures are in the red, as markets eye developments in the Middle East. The Israel-Hamas war continued to shake the markets. The explosion at a Gaza hospital on Tuesday, and the failure of diplomatic efforts to bring all sides together for negotiations, added to the increasingly tense tone and the threat of a widening in the conflict.

Treasury yields have backed up to 4.958% and the 10-year Bund yield is eyeing the 3% mark, as oil prices remain at high levels. The Fed’s Williams said interest rates will have to stay at restrictive levels “for some time” and the higher for longer message, not just from the Fed, but the BoE and ECB as well, is adding to pressure on stocks and bonds.

USDIndex has lifted to 106.6, the VIX jumped 8.4% to 19.38.
Stocks: Wall Street was in decline from the open and tumbled sharply into the close. Poor earnings and/or guidance added to the selling. The US100 closed with a -1.62% loss, while the US500 was -1.34% lower, and the US30 off -0.98%. In spite of the risk-off flows, Treasuries failed to benefit due to worries over the strength in the economy keeping inflation elevated. There are also fiscal policy concerns with the massive, and increasing, deficit and debt.
USOIL prices are off highs, after the US suspended some sanctions on Venezuelan output, but the front end WTI contract is still at $86.80 per barrel, Brent over $91 per barrel.
Gold rose 1.38% to $1963, as escalating tensions in the Middle East have boosted haven flows today and the precious metal benefited, while Treasuries and EGBs pared losses.
Today: Fed Powell speech, US Jobless Claims and Philly Fed.

Interesting Mover: EURAUD (+0.60%) breaking downchannel and inverse head and shoulder formation at 1.6650, indicating a potential return to 1.69 highs.


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Andria Pichidi

Market Analyst

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