Global stocks advance; gold accelerates ahead of Powell's speech – US Open Note

Evergrande's default delayed 

While everyone was convinced that the endgame for Evergrande was a certainty, China’s indebted property giant made a last-minute $84mln interest payment overnight, avoiding an official default ahead of its 30-day deadline expiring this weekend.

The news brought some risk-on back into play on Friday, propping stock markets and underpinning commodity-dependent currencies such as the aussie and the kiwi, though whether the company can only delay an imminent default remains to be seen.

For the time being, corporate earnings will keep driving equities next week. Although not everyone is comfortable with the ongoing supply crunches and their inflationary effects on input prices, a bulk of companies have beaten lowered expectations, signaling that they can stay afloat despite the pandemic challenges.

Investors will be eagerly waiting to see whether US big tech companies are also on top of the situation next week, though Snap's cloudy outlook on advertising spending raised a red flag recently. Should the tech sector give the green light instead, the Nasdaq 100 could rally towards September’s record high. Note that the S&P 500 and Dow Jones have already sailed back to uncharted waters this week. Wall Street is softly up at the start of the US trading.

Meanwhile in Europe, solid earnings results boosted consumer cyclicals and non-cyclical shares, pushing the pan-European STOXX 600 to fresh multi-week highs.

Powell speech, US flash Markit PMIs on the agenda

Following a couple of hawkish comments from his colleagues, Fed chief Jerome Powell will be at the center of attention today during a panel discussion at 15:00 GMT. Atlanta U.S Federal Reserve President Raphael Bostic was the latest to call for a tighter monetary policy on Thursday, saying that the central bank should proceed with a rate hike at the end of 2022 as supply constraints and high demand are expected to keep inflation high into next year.

Bond tapering is already on the Fed’s agenda this year, though the outlook for interest rates is still uncertain despite the latest dot plot showing stronger rate hike expectations for 2022 and 2023. Powell will probably refrain from sending any serious signals on interest rates today as the central bank would wisely want to avoid any commitments on rate hikes before bond tapering implications show up on the data. But this is still some way ahead.

In the meantime, US flash Markit PMI figures for October would be worthy to watch at 13:45 GMT. Eurozone and UK equivalents managed to surprise to the upside today, especially on the manufacturing sector, therefore investors may hope for similar results to add some footing under the dollar.

The dollar is currently trading slightly negative versus the safe-haven yen for the third consecutive day at 113.80, while against a basket of six major currencies, it is set to post its second weekly loss around 93.70.

Other news

Retail sales data out of Canada was another bright spot, showing positive growth in August after a steep contraction in July. The reaction in the loonie, however, was dim, with dollar/loonie remaining almost flat around 1.2330.

On the other hand, UK retail sales added some downside pressure to the pound but inflation comments from the BoE's new chief economist brought the balance again, leaving cable stable at 1.3786.

Euro/dollar is set to close the week with soft gains at 1.1636 despite another surge in inflation expectations. The German 10-year bond yield reached a new peak at -0.069% before turning almost neutral on the day.

The inflation situation, the dollar weakness and the latest pullback in Treasury yields is boding well for gold. The precious metal breached the key $1,795 resistance level, raising the odds for further improvement in the coming sessions.

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.