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Markets:
- Gold fell $3 to $2,342
- US 10-year Treasury yields rise 9.8 basis points to 4.39%
- The price of West Texas Intermediate crude fell 19 cents to $80.64
- The S&P 500 fell 0.4%.
- Australian Dollar Advances, Yen Lags
Friday was the last day of the quarter, and this made drawing conclusions difficult. It was especially difficult because the American political landscape was in disarray due to Joe Biden’s poor debate performance.
All eyes were on the PCE report early on and it showed some modest slowdown, albeit with some pressure on wages. Initial market moves were limited to 15 points, and it was the later UMich data that provided the biggest jolt as inflation readings in that report fell. The dollar sell-off on both was short-lived and ended the day with only modest moves.
The bond sell-off was even more dramatic, holding steady and then accelerating late. The timing of the shift points to end-of-quarter flows, but you could also weave an argument that Republican defeat and larger deficits are now more likely, unlike a divided Congress. As for politics, I’ll spare you the rest of the twists and turns, but it’s going to be an interesting weekend between the effort to oust Biden and the vote on Sunday in France.
In Japan, the yen has fallen again despite Kanda’s dismissal. The new top currency diplomat is Atsushi Mimura, and I think he will want to do something to shore up his credibility, which has had a big impact. It evaporated Under Kanda’s leadership. Although USD/JPY is higher during the day, I would rather point to US yields and French uncertainty in this regard.
Have a nice weekend. Greg and Eamonn will be back next week.
