Market Update – October 31 – Stock Market Decline & Significant Drop in Value of Japanese Yen

By Gustavo Nils Nov2,2023

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Asian stock markets traded mixed as weaker than expected PMI reports signaled ongoing weakness, especially in the manufacturing sector. China bourses underperformed. In contrast, treasuries found buyers, with the US 10-year rate down -5.7 bp at 4.84% and the 10-year Bund yield dropping -3.3 bp to 2.79%. Stock futures were higher across Europe but down in the US.

The USDJPY jumped to 150.24, with the Yen falling to 2-month lows after the Bank of Japan (BOJ) made only minor changes to its policy settings. This disappointed some in the market who had expected more. The BOJ is keeping its cap on long-term yields at 1%, leaving its negative interest rate untouched and adding flexibility to its yield curve control.

Financial stocks were the biggest winners, with insurance and banking indexes rallying more than 2% each, leading gains among the 33 industry sectors. Higher long-term yields and a steeper yield curve improve the outlook for returns from lending and investing.

Earnings beats from McDonald’s and SoFi provided support, with attention now turning to Apple and other key earnings this week. The USDIndex dipped to 105.85 from a peak of 106.704 after the Nikkei report, currently settled at 106.10.

Antipodeans, often used as a liquid proxy for the Yuan, were further pressured by Chinese data. For example, the AUDUSD initially dipped to 0.6340.

Gold and USOIL saw unwinding of some of Friday’s haven demand. Gold fell about -0.5% to $1990 per oz, while USOIL slid to $81.50 (Trendline & 200-DMA).

Key events for the day included Canadian GDP, EU preliminary GDP and CPI, and NZ labor data. Earnings to watch included AMC, BP, and Pfizer.

EURJPY was an interesting mover, returning 5-day losses and continuing to rise with attention turning to 162-162.40 (1998 highs & 2007-2008 highs).

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute independent investment research. It does not contain investment advice or recommendations and is not a solicitation for buying or selling any financial instrument. Past performance is not a guarantee or reliable indicator of future performance. Users acknowledge the high level of risk involved in investing in leveraged products and accept sole responsibility and liability.

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