Daily Market Commentary 5th October 2023

US and European markets stabilised overnight, following some dramatic sell-offs in equities and bonds. US Bond Yields hit 16-year highs in the previous session, but retreated overnight, as the US Labour market may be cooling? The ADP Jobs report was weak, with the private sector only adding 89,000 jobs, lower than expected. The cooling of the labour market is essential to the cooling of inflation, and therefore, the stabilising of interest rates. PMI data across Europe and the US remained weak, following the dreadful Manufacturing numbers out of Europe, earlier in the week. Recessionary conditions prevail in Europe, and the weak economic data, shows little signs of improvement. Lower US Bond Yields released some of the upward pressure on the US Dollar, with the EUR bouncing back above 1.0500, while the GBP pushed back to 1.2150.

The RBNZ left rates unchanged, as expected, ahead of the looming national election, due in less than two weeks. The RBNZ recognised inflationary pressures remain and that there may be further rate rises to come, post-election. Hopefully the post-election government will right the economic ship and dump the ‘woke ‘RBNZ Governor. The Central Bank’s decision had pushed the NZ Dollar well below 0.5900, but the flagging reserve allowed a recovery overnight. The AUD bounced off 0.6300 and local markets will look closely at the Australian trade numbers, due to be released today. Market attention will focus on the key Non-Farm Payrolls number, which is expected to be weak, out Friday.