Currently, there are two primary factors at play. The result of Japan’s LDP leadership contest indicates that the country will soon have its first female prime minister. She supports the conventional LDP policy framework, which includes expansionary fiscal measures and promotes a stance of easy monetary policy. The yen experienced significant volatility, paralleling the movement in Japanese bonds, with the 40-year yield increasing by 15 basis points to approximately 3.55%. Japanese equities surged by 3% to 4%. The second development involved the unforeseen resignation of the French prime minister, who had held office for less than a month.

French bonds and stocks have experienced selling pressure, resulting in a decline in the euro. In light of the ongoing federal government shutdown in the US, which shows no indication of resolution, the dollar has strengthened against almost all currencies today. The MSCI Asia Pacific Index experienced a notable increase of 2.75% last week, while mainland Chinese markets were closed due to the extended national holiday. The majority of markets in the region experienced a continued rally today, with the notable exceptions of Hong Kong and Australia among the larger exchanges, primarily driven by Taiwan and South Korea. France’s CAC 40 has declined by over 1.6%, and the Stoxx 600 is interrupting a six-day upward trend, showing a decrease of approximately 0.3%. Futures for the US S&P 500 and Nasdaq are showing an increase of 0.35% to 0.55%. In Europe, benchmark 10-year yields are generally 2-3 basis points higher, with the French yield showing a notable increase of nearly eight basis points, while the 10-year Gilt yield has risen by five basis points.

The 10-year US Treasury yield has increased by three basis points, now standing at 4.15%. Gold has surged to a new record high close to $3950, currently trading just below $3940 during late European morning activity. OPEC+ has declared a 137k barrel increase in output for the upcoming month, a figure that falls short of the more significant increases some had anticipated. This is contributing to the support of prices today. November WTI has increased by just over $1 per barrel and is hovering around $62. The peak observed last week exceeded $65.

The dollar experienced a rally following the FOMC meeting, increasing from approximately 96.20 to 98.60. The asset experienced a retreat to nearly 97.40 last week and has primarily consolidated below the 98.00 mark in the recent sessions. The sharp depreciation of the yen following the results of Japan’s LDP leadership contest, coupled with the unexpected resignation of France’s prime minister, propelled the Dollar Index to nearly 98.50 today. The peak observed in late September was approximately 98.60. The 91.70 level represents the (61.8%) retracement of DXY’s decline since August 1, which has constrained its movement for two months. With the US federal government remaining closed and lacking input from the Federal Reserve or private sector, sentiment, momentum, and market positioning hold increased influence.