European stocks surge after Fed signals interest rate pause
European stocks surged early on Tuesday, buoyed by suggestions from Federal Reserve officials that interest rates will remain unchanged when the US central bank next meets.
The region-wide Stoxx Europe 600 climbed 1.2 per cent in early trade, London’s FTSE 100 added 0.9 per cent and France’s Cac 40 rose 1.2 per cent.
Contracts tracking Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq 100 gained 0.1 per cent and 0.2 per cent, respectively, ahead of the New York open. In the bond market, Treasury yields plunged, reflecting rising prices.
The moves came after Fed officials on Monday hinted that the lagged effects of previous rate rises may be sufficient to return inflation to their 2 per cent target.
Israel attacks drive down US Treasury yields as investors flock to safe havens
US Treasury yields fell on Tuesday as investors piled into the traditional haven following a federal holiday and turmoil in Israel.
The yield on the 10-year US Treasury fell 0.15 percentage points to 4.65 per cent in Tokyo on Tuesday morning as trading of US government bonds resumed in Asia. Bond yields fall as prices rise.
The yield on the two-year note fell 0.11 percentage points to 4.97 per cent.
The fall in yields also marked a partial reversal of a sell-off in longer-maturity bonds last week, which had raised concerns over the impact of the US Federal Reserve’s “higher for longer” approach to interest rates.
Bond trading was closed on Monday in the US for Columbus Day.
What to watch in Europe today
Events: UK opposition leader Sir Keir Starmer is expected to address his party’s conference in Liverpool. The minutes of the most recent Bank of England Financial Policy Committee meeting are published. Elsewhere, Iraqi prime minister Mohammed Shia al-Sudani begins a two-day visit to Russia and holds talks with President Vladimir Putin. Kyiv mayor Vitali Klitschko and Ukrainian ambassador to Germany Oleksii Makeiev speak at the annual Reshape Europe conference in Berlin hosted by the Friedrich Naumann Foundation for Freedom.
Economic data: British Retail Consortium issues its September Retail Sales Monitor, which measures the change in value of same-store sales in member retail outlets throughout the UK. Norway releases inflation data for September. Italian industrial production for August and UK second-quarter labour productivity are also published.
Corporate results: German shoe brand Birkenstock is expected to announce final initial public offering pricing before shares start trading in New York on Wednesday. LVMH announces third-quarter revenue, while Reach and Robert Walters offer trading updates. YouGov releases full-year data.
China developer Country Garden warns it might miss offshore payments
Chinese property developer Country Garden warned investors on Tuesday that it might not be able to meet all of its offshore payment obligations, as the private group inches closer to default.
The company’s cash position remains under “significant” pressure, it said in a Hong Kong Stock Exchange filing, adding that its housing sales have been under pressure since the beginning of 2023.
The company said in a separate statement that it is seeking to ready plans to resolve its offshore debt payment risks.
The cash-strapped developer narrowly avoided a technical default last month by paying two dollar bonds within their grace period.
Taiwan’s Tsai calls for peace across straits in final National Day address
Taiwan’s president Tsai Ing-wen has urged China to maintain peace across the Taiwan Strait – a task she called a “historic responsibility and common mission” for the two sides.
In her last National Day address before the country elects a new president in January, she said unprecedented international support allowed Taiwan to be “calm and self-assured in facing China, creating conditions for peaceful coexistence”.
Tsai’s appeal comes as China, which claims Taiwan as part of its territory, is stepping up a military intimidation campaign around the island and has denounced Lai Ching-te, the presidential candidate for Tsai’s party who leads in all polls, as a separatist.
Police fatally shoot driver who crashed car into China’s San Francisco consulate
Police in San Francisco shot dead a driver who crashed a car into the Chinese consulate-general on Monday afternoon, police said.
Officers found a vehicle resting inside the mission’s building and an “officer-involved shooting” occurred, the San Francisco Police Department said.
The suspect was pronounced dead after being taken to hospital, police added.
The consulate-general said that the person had driven a vehicle into the building’s documentation hall, causing damage and endangering people inside.
Chinese officials said “stern representations” had been lodged with US authorities.
Australian competition watchdog gives conditional nod to $12bn Origin takeover
The Australian competition watchdog has conditionally approved an A$18.7bn (US$12bn) bid by Canadian investment group Brookfield Asset Management and US-based EIG Global Energy Partners to purchase one of the country’s largest energy companies.
The Australian Competition and Consumer Commission granted authorisation for the bid to purchase liquefied natural gas developer Origin Energy, saying it had deemed that the move “would not be likely to substantially lessen competition”.
Brookfield has called its bid a “once in a generation” opportunity to invest in the global energy transition. The companies entered into a scheme implementation deed in March. The deal is still subject to a vote by Origin shareholders.
Asian equities gain as Fed signals caution over rate increases
Asian equities rose on Tuesday as US Federal Reserve officials signalled caution over further raising interest rates.
Hong Kong’s Hang Seng index added 1.9 per cent, China’s CSI 300 rose 0.2 per cent, South Korea’s Kospi advanced 1.1 per cent and Japan’s Topix gained 1.8 per cent.
Fed vice-chair Philip Jefferson said on Monday the central bank was in a “sensitive period of risk management” and needed to “proceed carefully” with any rate increases.
He echoed comments by Dallas Fed president Lorie Logan, who said tighter financial conditions could reduce the need for a higher policy rate.
The S&P 500 gained 0.6 per cent and the Nasdaq Composite added 0.4 per cent.
What to watch in Asia today
Taiwan: On today’s Double Tenth National Day, Taiwan marks the anniversary of the Wuchang Uprising. Financial markets are closed.
Global economy: The IMF will publish its Global Economic Outlook and Global Financial Stability Report.
Markets: Futures in Hong Kong and Japan advanced on Tuesday morning. Wall Street rose on Monday, pushed higher by energy stocks as oil prices gained about 4 per cent. The S&P 500 gained 0.6 per cent and the Nasdaq Composite added 0.4 per cent.
Saudi Arabia stands by Palestinians, Prince Mohammed bin Salman says
Saudi Arabia’s Crown Prince Mohammed bin Salman told Palestinian president Mahmoud Abbas his country stands by Palestinians and was working to stop the conflict, the kingdom’s state news agency said.
Prince Mohammed “affirmed the necessity of observing international law and not targeting civilians”, it added.
Saudi Arabia has been negotiating an agreement with Israel and the US that could see Washington grant Saudi Arabia a defence agreement in return for the kingdom normalising relations with Israel.
However, the conflict in Israel and Gaza may set back those talks.
Western leaders issue joint statement in support of Israel
US president Joe Biden, British prime minister Rishi Sunak and the leaders of Germany, France and Italy issued a joint expression of support for Israel and an “unequivocal condemnation” of Hamas and its “appalling acts of terrorism”.
The joint statement said that the world had “watched in horror” as Hamas launched its deadly assault on Israeli civilians and said there was “never any justification” for terrorism.
“We will remain united and coordinated, together as allies, and as common friends of Israel, to ensure Israel is able to defend itself, and to ultimately set the conditions for a peaceful and integrated Middle East region, ” the leaders said.
Energy stocks lead Wall Street higher as oil gains 4%
Wall Street advanced on Monday, pushed higher by energy stocks as the price of oil rose about 4 per cent.
The benchmark S&P 500 gained 0.6 per cent in a broad rally that was led by the energy sector. The tech-heavy Nasdaq Composite added 0.4 per cent.
Although stocks advanced, there were signs investors were also moving into assets perceived to be relatively safe, including proxies for government debt and gold.
With the US government bond market shut for a federal holiday, investors piled into the iShares 20+ year Treasury Bond exchange-traded fund, pushing its shares 2.3 per cent higher.
Robert Kennedy Jr announces independent bid for US president
Robert F Kennedy Jr announced on Monday that he would run for president as an independent, ending his long-shot bid for the Democratic nomination.
Kennedy, an environmental lawyer and vaccine sceptic, has drawn support from Americans disaffected with the two-party system, while drawing upon the allure of his legendary last name.
“I am here today to declare myself an independent candidate,” said Kennedy, nephew of the late former president John F Kennedy, at a rally in Philadelphia. “We declare independence from the two political parties — and the corrupt interests that dominate them and the entire rigged system.”
Energy stocks push US indices into positive territory
US stocks turned higher in afternoon trade as energy stocks advanced in tandem with a rise in oil prices.
The benchmark S&P 500 gained 0.6 per cent, while the tech-heavy Nasdaq Composite added 0.3 per cent in New York. Oil supermajors Chevron, ExxonMobil, and ConocoPhillips all gained more than 3 per cent.
Oil prices bounced back from their biggest weekly decline in more than six months, with international benchmark Brent crude rising 4 per cent to $87.95 a barrel, and US marker West Texas Intermediate also increasing 4 per cent to $86.14 a barrel.
Fed official doubles down on proceeding ‘carefully’ with rate decisions
The vice-chair of the Federal Reserve reiterated the need for the US central bank to “proceed carefully” with forthcoming interest rate decisions, emphasising his focus on the recent surge in borrowing costs.
Officials “are in a sensitive period of risk management”, needing to balance the respective risks of not tightening enough and being too restrictive, Philip Jefferson said in prepared remarks on Monday.
“I will remain cognisant of the tightening in financial conditions through higher bond yields” while assessing “the future path of policy”.
His comments aligned closely with those from Dallas Fed president Lorie Logan, who earlier on Monday noted that tighter financial conditions could mean the bank does less in terms of raising its policy rate.
