A look at the day ahead from Sujata.
A week that started with expectations of hawkish central banks, flattening bond yield curves and an equity correction is heading for a calmer end after Fed assurances that rate hikes were not yet on its mind and the Bank of England stunned markets by keeping policy steady.
Bond curves are mostly steeper as rate hike expectations retreat — the two-year Treasury yield has tumbled more than 10 basis points off 19-month peaks of 0.5640% touched last week.
Britain’s two-year gilt yield fell almost 21 bps after Thursday’s UK rate decision — its biggest one-day fall since the day after the 2016 Brexit referendum
And with “real” or inflation-adjusted yields resuming their fall, global equities appear headed towards the $100-trillion market cap mark.
The odd central bank-fuelled hiccup will be thrown in, doubtless, and don’t forget China’s property malaise — shares in homebuilder Kaisa were suspended after an affiliate missed a payment, pulling Chinese bourses lower and knocking European and U.S. futures.
Economic data meanwhile continues to underwhelm, with Germany’s industrial output down sharply in September, hit by supply bottlenecks. Japan’s household spending fell in September in a sign the economy shrank in the third quarter.
Watch now for euro area retail sales and U.S. monthly payrolls data, which a Reuters poll forecasts will show 450,000 jobs added last month. Last month’s report was a dismal one remember, so stock market bulls will be watching.
Key developments that should provide more direction to markets on Friday:
– British Airways parent company IAG said it was heading for a 3 billion euro loss for 2021 [L8N2RW1LA]
-Honda lowers profit outlook 15% amid chip shortage [L1N2RW09Z]
-Uber makes first ever quarterly operating profit
-ECB speakers: Vice-President Luis de Guindos, board member Fabio Panetta
-British house prices rose 0.9% in October
-Data: Euro zone retail sales, U.S. non farm payrolls
-Central Bank of Argentina meets
– Europe earnings; Amadeus, IAG
(For graphic on Market cap – https://fingfx.thomsonreuters.com/gfx/mkt/akpezmzdnvr/Pasted%20image%201636064587708.png)
(Reporting by Sujata Rao; editing by Dhara Ranasinghe)