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International financial news

International financial news

[10-year US bond yields hit a three-week single-week increase, yield curve steeped] 10-year US bond yields broke through 1.9% on Friday to a six-week high, rising 13 basis points and rising for eight days. This week, it has risen by more than 30 basis points, the largest weekly gain since November 2016, and the yields of European and Japanese government bonds have also risen sharply. Market risk appetite has risen, and the market has lowered the Fed’s expectation of a rate cut during the year.

[US Michigan consumer confidence rebounded from a three-year low in early September] US September University of Michigan consumer confidence index initial value of 92, higher than expected and the previous value, still the third lowest since the 2016 US presidential election. Although the consumer's current situation and the expected index rebounded from the previous quarter, it was still weaker than expected, and the five-year inflation expectation returned to a 40-year low.

[Director of the International Energy Agency: New oil supply may put pressure on oil prices next year] The International Energy Agency Director Biro said that next year's US production will increase by 1.3 million barrels per day, from the United States, Brazil, Norway and other countries. The volume will increase, which will put downward pressure on oil prices; oil demand growth will slow down due to the global economic slowdown.

[Baker Hughes: The total number of oil drillings in the US to September 13 was 733, the lowest level since November 2017]



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European Central Bank Chief Economist Philip Lane speaks

Summary of investment bank views

National Bank of Canada: The Fed is expected to cut interest rates by 25 basis points next week and cut interest rates by 25 basis points before the end of the year.

The Federal Reserve’s Brad recently advocated a 50 basis point rate cut. We believe that there is reason to support such a policy path. Trade uncertainty is still a big problem, and the American Institute of Supply Management (ISM) report shows that manufacturing is deteriorating. The key to the future will be whether the slowdown in manufacturing will spread to other economic sectors.

So far, the labor market is still strong and supports healthy consumer spending. At the same time, inflation is moving towards target levels and stock indexes are near record highs. In this context, we believe that the Fed will find it difficult to cut interest rates by 50 basis points. Therefore, we predict that the Fed will cut interest rates by 25 basis points next week and cut interest rates by 25 basis points before the end of the year.

TD Securities: The Bank of Japan will stand still and adopt a wait-and-see attitude

The Bank of Japan has a late-comer advantage in following the European Central Bank and the Federal Reserve. The recent weakening of the yen and the rebound in bond yields should comfort the Bank of Japan. We did see an adjustment in the October Yield Curve Control (YCC) to increase flexibility and mitigate the risk of negative yields. At next week's meeting, the Bank of Japan is expected to suggest a curve corridor enhancement or a decline in the YCC curve.

Westpac: Next week's auburn against the US dollar

Westpac pointed out that last week was the best week for the Australian dollar in 2019, with a weekly gain of 1.7%. The improvement in international trade situation and data seems to be enough for the Reserve Bank of Australia to maintain a general optimistic view of Australia's growth prospects, consumer and business confidence. Growth in the third or fourth quarter is not a good sign; 

In fact, the rise in Australian dollar yields is mainly due to the US phenomenon. In recent days, the spread has slightly fluctuated against the Australian dollar, but the US dollar is firm, and the Fed’s September interest rate decision is expected. And weak Australian employment data may limit its gains, the Australian dollar may need a positive surprise to close above the 100-day moving average of 0.6906, the prospect of the next week is neutral.

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