Daily Market Commentary 4th October 2023

Global equity markets continue to haemorrhage, as bond yields soar across Europe and the USA. Inflation is driving high interest rates and creating recessionary conditions in both Europe and the USA.  Europe is beginning to de-industrialise under the pressure of high energy prices. The latest manufacturing PMI data from Europe was a near record lows and sends warning signals to markets. In the US job openings rose back to 9.61 million, according to the latest Jolts jobs report. Markets keenly await a series of employment reports being released in the US, culminating in the Non-Farm Payrolls, Friday. The Fed is looking for the Labour market to cool, to release inflationary pressure from wages. Inflation remains at the heart of the problem, in both Europe and the USA. Bond yields continue to rise, into record territory, adding to the upward pressure on the US Dollar. The EUR crashed to 1.0450, while the GBP floundered, trading down to 1.2050.

The RBA left rates unchanged, in line with expectations, as the political masters dictate to the new RBA Governor. This was despite rising inflation and recognition of a need to attack the economic cancer. The inaction will be very costly in the medium term. The RBA lack of action triggered a selloff in the AUD, which was only gaining momentum, as the rally in the reserve gains momentum. The AUD has now slipped below key support levels and trades under 0.6300, while the NZD dipped below 0.5900 ahead of the RBNZ rate decision today. The very ‘woke’ RBNZ has been fairly aggressive in their attack on inflation, but the looming election, will force a hold from the Central Bank.