Headlines

*Asian markets spooked by recession risks as dollar rallies

*Poll: Fed to take rates even higher with further pain ahead

*BoJ board agreed on need for vigilance on sharp yen moves

*UK price inflation in shops posts record high as pound tumbles

FX: USD is making fresh multi-decade highs this morning as risk sentiment turns downbeat again. The US 10-year Treasury yield hit the key psychological 4% level earlier today.

GBP pushed up to a high of 1.0837 before closing at 1.0732. Near-term support is 1.0631. EUR made a new 20-year lows at 0.9541. Today would mark seven consecutive days of losses. The possible sabotage of Nord Stream has increased geopolitical tensions in the eurozone.

USD/JPY advanced to 144.90 and is hovering around the recent highs today. Intervention fears are high. AUD made another cycle low this morning at 0.6377. USD/CAD remains hugely overbought trading just below 1.38.

Stocks: US equities ended a mixed bag. The Dow and S&P 500 closed lower for the sixth straight session. The latter, benchmark blue-chip index hit its lowest intraday level since November 2020. The tech-heavy Nasdaq 100 ended 0.25% higher. All three major averages are in bear market territory.

APAC stocks are lower across the board following rising yields so renewed bond selling on Wall Street. Sentiment was also soured by news that Apple ditched its plan to boost iPhone production due to weaker demand.

The Euro Stoxx 50 future is down over 1% after the cash market closed down 0.4% yesterday.  US equity futures (Nasdaq 100 -0.81%) are subdued amid Apple’s output disappointment and higher yields.

Day Ahead – More central bank speeches

It’s a busy week for central bank officials. We had a slew of hawkish Fed comments yesterday. But the chances of another jumbo 75bp rate hike in November are easing as recession fears grow intense. This now stands at around 59% from 70% last week. The risk event calendar is quiet so focus will also be on bond markets and the pound.

The BoE’s chief economist warned yesterday that a significant monetary policy response was needed to counter fiscal easing. But he played down the possibility of an intermeeting response. He also scored something of an own goal by saying the bank will continue with gilt sales. A stop to this was mooted as a possible move to slow the sterling selloff. We get the bank’s Cunliffe speaking in an hour or so.

Chart of the Day – Dax falls through support zone

We highlighted on this week’s webinar key support levels on the major stock indices. Nervous financial markets were poised to test these at the start of the week. The potential deliberate act of sabotage on Nord Stream has further added to the gloom and tension in Europe.  

Bearish momentum pushed the German Dax through 12,390/12,438 on Monday. Even so-called “Turnaround Tuesday” failed to brighten sentiment. That zone now acts as strong resistance above. The hallway point of March 2020 low and November high sits at 12,272. We are trading some distance from the 200-week SMA. The last time we were further away was during the pandemic selloff. Next support is 11,868. More significant support is 11,450/551.