Equities experienced a surge in the past week due to dovish market perceptions of the Federal Reserve and weaker US data. The Federal Reserve maintained the Fed Funds target range at 5.25-5.50%, delivering a balanced message with dovish undertones. Despite weaker ISM manufacturing and ADP (NASDAQ:ADP) employment change, the US labor markets demonstrated resilience, as evidenced by a 1.2% rise in the Conference Board wage index in Q3 and robust JOLTs job openings.
The Bank of Japan (BoJ) signaled a potential shift from its yield curve control policy (YCC), redefining the 1% cap on 10-year JGB yields as a reference rather than a rigid bound, contingent upon confirmation of sustainable inflation above 2%. The BoJ also raised their fiscal year 2024 inflation forecast to 2.8%.
Euro area data supported a 'soft-landing' narrative with a fall in headline inflation to 2.9% y/y and core inflation dropping to 4.2% y/y. This was coupled with a slight contraction in GDP growth and positive signs in underlying inflationary momentum.
Meanwhile, China's October PMIs raised concerns over the consumer engine as both Manufacturing PMI and service PMI fell, ahead of upcoming trade data and CPI releases.
The Bank of England held the bank rate steady at 5.25%, lowering growth and near-term inflation projections, and suggesting that the peak in the Bank Rate may have been reached.
The upcoming meeting of the Reserve Bank of Australia is anticipated due to divided market expectations regarding rate changes. This development comes amidst an overall slowdown in US treasury bond issuance, another factor contributing to the rise in equities during the week.
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