Macro Roundup (Oct 12)

SHANGHAI, Oct 12 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The dollar soared to its highest in nearly three years versus the Japanese yen on Monday as investors remained confident the U.S. Federal Reserve will announce a tapering of its massive bond-buying next month despite softer U.S. payrolls figures.

Traders shrugged off Friday’s mostly lacklustre jobs report, pushing U.S. bond yields higher. The yen, which is known for being particularly sensitive to interest rate differentials, hit 113 yen per dollar for the first time since December 2018 in morning London trade.

The Japanese currency was also hurt by a slight tilt towards riskier currencies, with the Australian dollar gaining on the greenback, as oil prices hit multi-year highs on the back of the energy crisis griping major economies amid a pick-up in economic activity.

With Japanese government bond rates well anchored and the Bank of Japan keeping policy on ice, expectations of a Fed tapering announcement soon should press U.S. Treasury yields higher, favouring higher dollar-yen ranges, said Roberto Cobo Garcia, head of FX strategy at BBVA.

The main risk for the dollar-yen pairing this week comes from U.S. data, with consumer price index and retail sales both due on tap.

Stock futures were little changed in overnight trading on Monday after Wall Street kicked off the week on a sour note.

Futures on the Dow Jones Industrial Average dipped 20 points. S&P 500 futures and Nasdaq 100 futures were both down by 0.1%.

The market suffered losses to start the week with the blue-chip Dow shedding 250 points. The S&P 500 fell 0.7% Monday with nine of the 11 sectors registering losses, while the tech-heavy Nasdaq Composite dipped 0.6%.

“There are a lot of headwinds out there as we embark on corporate earnings, and traders will be looking for any and all indications of guidance — especially as the threat of slower growth looms large,” said Chris Larkin, managing director of trading at E-Trade Financial. “As new data emerges and traders gain some potential insight into growth prospects, it may be wise to prepare for more bumps in the road.”

Oil prices jumped on Monday to the highest levels in years, fuelled by rebounding global demand that has contributed to power and gas shortages in key economies like China.

Brent crude rose $1.26, or 1.5%, to settle at $83.65 a barrel. The session high was $84.60, its highest since October 2018.

U.S. West Texas Intermediate (WTI) crude gained $1.17, or 1.5%, to settle at $80.52, after touching its highest since late 2014 at $82.18.

The pace of economic recovery from the pandemic has supercharged energy demand at a time when oil output has slowed due to cutbacks from producing nations during the pandemic, focus on dividends by oil companies and pressure on governments to transition to cleaner energy.

Gold prices edged lower on Monday, weighed by a rallying dollar on bets the U.S. Federal Reserve would not put off stimulus tapering, although stagflation expectations limited losses in inflation-hedge bullion.

Spot gold was 0.1% lower at $1,754.54 per ounce, while U.S. gold futures settled down 0.1% at $1,755.7.

“The dollar is the main factor,” said Edward Moya, senior market analyst at brokerage OANDA.

The pan-European Stoxx 600 hovered around the flatline and finished flat, with travel and leisure stocks shedding 1% while basic resources gained 3%.

Three European Central Bank policymakers on Friday discussed the possibility of exiting pandemic-era monetary and fiscal support measures even if it makes some governments unhappy, according to reports from a panel discussion in Slovakia. The ECB is expected to make a decision on its extraordinary stimulus measures in December.