Risk-off Sentiment Observed on Monday
10 October 2022
The mood in the markets has not changed over the weekend, with investors buying safe-haven assets like the USD and selling stocks, bonds and commodities.
Due to the US holiday of Columbus Day, US bond markets will be closed. As a result, trading activity may be muted in the afternoon. In addition, the October Sentix Investor Confidence statistics will be presented on the European economic calendar.
Vladimir Putin, the president of Russia, said over the weekend that Ukraine was responsible for the attack on the Kerch Strait bridge in Crimea. Early in the morning in Europe, news of explosions in Kyiv brought on by Russian missile strikes led to continuous risk-off trading.
US-China relations deteriorate further
The White House published export regulations on Monday, shutting off Chinese firms from specific semiconductor chips built using US machinery. As a result, Chinese chipmakers led falls due to the new US trade restrictions.
If China retaliates, the US action may deteriorate trade relations between the two largest economies in the world and have much more severe economic ramifications.
Data released over the weekend revealed that China's services sector unexpectedly contracted in September amidst ongoing COVID-related disruptions, further contributing to the worsening sentiment toward the country. In addition, a recent rise in COVID cases has also sparked concerns about more lockdowns.
US labor market stays firm
According to data released Friday by the US Bureau of Labor Statistics, nonfarm payrolls increased by 263,000 in September. This reading was above the 250,000 gain that the market had anticipated. The report also showed a decrease in the unemployment rate from 3.7% in August to 3.5% today.
The dollar jumped, along with US yields, while stocks crashed again as the report confirmed the Fed's hawkish bias. The probability that the central bank would increase interest rates by 75 basis points in November is over 80%, according to the markets.