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.

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