Neither the US nor China have retreated from the precipice reached prior to the weekend; however, numerous market participants have determined that this represents a “escalation to de-escalate”. The foreign exchange market has reversed some of the price movements observed prior to the weekend. The dollar-bloc currencies and the Norwegian krone, which experienced declines prior to the weekend, are now showing strength, whereas the euro, sterling, and yen have seen a reduction in the gains achieved last Friday. Emerging market currencies are displaying a mixed performance, as the Taiwanese dollar and South Korean won, along with the majority of central European currencies, find themselves at the lower end of the emerging market currency spectrum today.
The PBOC has established the dollar’s reference rate at its lowest point since last November, alongside reporting stronger than anticipated exports and imports for September. The US S&P 500 experienced its most significant decline in six months prior to the weekend, leading to a downturn in Asian equities. Japanese markets were closed for a national holiday; however, all other major markets in the region experienced declines, with the Hang Seng and the index of mainland companies trading there seeing the most significant drop of approximately 1.5%. Taiwan’s market has resumed trading following its holiday and experienced a decline of 1.4%. Europe’s Stoxx 600, having declined approximately 1.7% over the past two sessions, has seen an increase of about 0.35% today.
US index futures are experiencing a broad upward trend. The US 10-year yield decreased by 10 basis points ahead of the weekend, settling at 4.03%, while Antipodean yields experienced a decline today. European yields are generally trending slightly lower. The current political landscape in France appears uncertain, with the 10-year yield declining by approximately half a basis point today. Gold has surged to a new record-high approaching $4080, while the pressure in silver has nudged it slightly above $51.70. November WTI dropped to approximately $58.20 before the weekend, marking its lowest point since May, and is now attempting to regain stability above $60.
Today, US banks are not operational, and the Treasury market is inactive; however, trading in equities will proceed as scheduled. Market participants appear to be exhibiting a reduced level of concern regarding the escalation in US-Chinese tensions, despite the absence of any resolutions. The timeline for the implementation of China’s new export licenses and the US 100% tariffs is set to occur following the anticipated meeting between Trump and Xi during the meeting later this month. The absence of a bilateral summit, however, indicated underlying tensions. The port levies for each of the ships will take effect tomorrow. The Dollar Index experienced an inside trading day ahead of the weekend, maintaining a solid position while remaining within the pre-weekend range. The critical factor is the range established last Thursday, approximately 98.70-99.55. Last Friday’s peak was marginally under 99.45, while today’s peak has exceeded 99.20 by a small margin.