Daily Market Commentary 16th October 2023

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Equity markets posted a week of gains and bond yields came off recent record highs, despite serious economic and Geo-Political challenges. Non-Farm Payrolls came in hot and inflation readings from US CPI and PPI were higher than expected, which would normally lead to higher bond yields and lower equity markets, but no? The surge in equities was also confusing, considering the outbreak of war in Israel, which should cause uncertainty and lead to market disruption. Stock markets instead rallied, bond yields drifted lower, and currencies were fairly stable. Inflation and war will impact the markets, and this will only be a matter of time. This coming week will reveal a plethora of economic data releases from China, including GDP growth, Retail Sales, and Industrial Production. US Retail Sales will be a highlight, to measure the state of the consumer and inflation data from Europe will also be key. The USD did regain some ground, with the EUR slipping back o 1.0500, while the GBP fell back to 1.2140.

The rising reserve hit the commodity currencies at the end of the trading week, with the AUD falling below 0.6300, as the NZD crashed below 0.5900 ahead of the National Elections. The NZ Election will be held over the weekend and polls point to a change in Government. If this is so, then a Centre-Right Coalition Government would be a positive for markets. A confused result may result in unsettled markets. In Australia markets will be focused on the RBA, which releases the minutes from their latest meeting and their Annual Report.

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