Daily Market Commentary 1st November 2023

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Markets closed out October on a positive note, with equities surging and bond yields settling lower. This has been another bad month for the share markets and bonds, which have struggled with volatile inflation and growth numbers. US 10-year bond yields reached 5%, and inflation appeared to be resurgent, once again, boosted by energy prices back on the rise.  The latest EU inflation levels plunged, with headline inflation tumbling to 2.9%, collapsing from 4.3%. European inflation levels are being tamed by deep recessionary conditions, suffered in the eurozone, and higher interest rates. GDP growth readings in EU Member States are all around zero, reflecting the deep recessionary conditions. The only concern is the pressure on energy prices, coming into the Northern Hemisphere winter, as the runaway inflationary conditions that sparked the crises, remain. The US Dollar has hardened up, with the EUR falling back to 1.0560, while the GBP slipped below 1.2150.

The Bank of Japan left rates unchanged, at yesterday’s monetary policy meeting, but tweaked interest rate controls. The Bank of Japan recognised the higher inflation levels, which has surged through the 2% target limits, allowing ‘band widths for bond yields more flexibility. The Yen was hammered, crashing to 151.71, way outside the recent trading ceiling of Y150, which has encouraged Bank of Japan intervention. NZ Business Confidence has surged into positive territory, reaching 23.4, gains attributable to the change in Government. The stronger reserve pushed commodity currencies lower, with the AUD falling to 0.6330, while the NZD attempts to hold onto 0.5800. Attention now turns to the Fed, but they are expected to leave rates unchanged, so most will be watching the narrative accompanying the decision.

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