EMEA Morning Outlook: Optimism with rate hike lifts sentiment; Focus on US jobs report.
What to expect: Opening of the trading session: European stock futures are rising amid hopes that major central banks may finalize interest rate hikes for now. In Asia, stock indexes track gains on Wall Street;''The dollar is flat; Treasury bond yields are mostly down; oil futures are rising; and the price of gold is little changed. Actions: European stocks are likely to continue to rise along with Wall Street and Asian stocks due to the decision by the Federal Reserve and the Bank of England not to raise interest rates this week. "The main theme of the past few days has been the rise in risk assets as equities rise across the board," Commerzbank said in a statement. Some market participants are interpreting the Federal Reserve's tone as a bit more contentious than expected and the possible end of the interest rate hike cycle, Commerzbank adds. The market's focus on the report on''s U.S. employment level for October. The reading, which indicates the labor market remains hot, could complicate the Federal Reserve's plans for interest rates and raise yields again. Federal Reserve Chairman Jerome Powell was cautious about ruling out raising interest rates at a news conference Wednesday. Currencies: The U.S. dollar is steady ahead of the October U.S.
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Bonds:
The level of 10-year yields''US Treasuries have likely ended their uptrend based on the daily technical chart, UOB reported. This is indicated by a sharp decline in overbought conditions and a rapid weakening of the uptrend.
In addition, the latest decline in yields has led to a disruption of the uptrend connecting the lows of September and October and a full price close below the 21-day exponential moving average on Thursday, UOB added. On the downside, the key support zone is between 4.510% and 4.540%.
Energy:
Oil futures rose slightly in Asia amid a general increase in risk appetite in markets, ANZ noted. Geopolitical risks are also supported, ANZ noted, citing Wall Street news''reserve system to trigger inflows to safe-haven assets.
Copper rose amid improving risk sentiment. Markets continue to rise after the US and UK central banks kept rates unchanged this week, ANZ noted.
The strong rise in equities carries a positive sentiment given that active rate hikes have been a headwind for base metals over the past 18 months, ANZ added.
- Iron ore prices have risen in Chinese trade, with sentiment buoyed by stimulus policies. China's latest 1 trillion yuan government bond agreement and a pledge to address local debt problems at a financial conference lifted expectations and market sentiment, Baocheng' reported'Futures.
The support from demand is weakening, however, as the profitability of steel mills has hardly improved, Baocheng noted. Weak profitability may lead to more production cuts among mills and change market fundamentals.
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