US Session (10/28/2021)

Major indices are on track to have their finest month in a year as fresh signals that corporate America is delivering on lofty earnings expectations drive stocks to new all-time highs.

Treasury yields continued to fluctuate, with the yield curve inverting in certain places.

The S&P 500 was driven to a new high by the real estate, industrial, and consumer discretionary business groupings, putting the benchmark index on track for a more than 6% gain in October.

The Dow Jones Industrial Average recovered from its losses on Wednesday as well. Amazon.com Inc. and Tesla Inc. both contributed to the Nasdaq 100 setting a new high. For the first time since the US government restored a two-decade maturity in 2020, the Treasury yield curve inverted between 20 and 30 years on Thursday.

The earnings of some of America's leading firms are being digested by investors. Caterpillar Inc., an industrial stalwart, increased after reporting better-than-expected results. Ford's stock jumped after estimates were raised and dividends were reinstated. After posting disappointing results late Wednesday, eBay Inc. fell. Amazon.com reported weaker-than-expected results after normal trading ended, pushing its stock down.

According to data gathered by BofA, companies in the S&P 500 that announced results increased net profit margins by 40 basis points to 12.4 percent over the previous quarter. With the exception of energy and consumer staples, the improvement has expanded throughout major industries.

Earlier a report revealed that the US economy grew at a 2% annual rate in the three months to September, down from the 2.6% median estimate in a Bloomberg survey, as consumer spending slowed. The GDP price index slowed from the previous quarter, although it still outperformed analysts' predictions. Weekly jobless claims fell to a pandemic low, according to a separate report.

The sector's yields were around 25 basis points lower than 30-year yields when 20-year treasury production commenced in May 2020. While expectations for Fed rate hikes beginning next year have flattened the curve in general, demand for 20-year assets looks to be less robust than for longer-term securities.

After European Central Bank President Lagarde stated that higher inflation may last longer than expected, the euro rose and European bonds sank. The monetary body expects prices to begin to moderate next year. The European Central Bank (ECB) had previously kept borrowing costs steady and stated that bond purchases will continue at a moderately slower pace. The Stoxx Europe 600 index increased in value.

Global equities are still around all-time highs, aided by a strong corporate earnings season so far, with profit margins increasing on average despite cost headwinds. The risk is that mood will deteriorate if investors lose faith in policymakers' capacity to keep inflation under control while fostering the economy's recovery.

The ECB strategy review: Walking a narrow path | VOX, CEPR Policy Portal

Asia Session (10/28/2021)

US futures and Asian stocks fell after Amazon and Apple reported disappointing earnings, and as traders weighed bond-market gyrations on concerns about inflation and monetary tightening.

Shares were lower in Japan and Hong Kong and wavered China.

Contracts on the Nasdaq 100 underperformed their counterparts on the S&P 500. Apple and Amazon fell in extended trading, signaling a combined market value drop of more than $200 billion when the US reopens. That overshadowed the upbeat views on company performance that had previously driven Wall Street to a record close.

The 10-year Treasury yield in the US fell. For the first time since the US government reintroduced a two-decade maturity in 2020, the curve between 20- and 30-years has inverted.

Global bond markets are whipsawing in the face of inflationary pressures and the prospect of interest-rate hikes.

Australian debt fell after the central bank decided not to defend its 0.1 percent yield target.

The US dollar rose from a one-month low, while crude oil fluctuated.

The debt crisis at China Evergrande Group remains a hot topic in China. Some bondholders received an overdue interest payment, buying the troubled property developer more time.


Europe Session (10/28/2021)

On Thursday, US index futures gained while European markets held steady as investors examined earnings reports to gauge the strength of the economic recovery. Short-term Treasury yields increased quicker than long-term yields.

Contracts on the S&P 500 and the NASDAQ 100 advanced, with bellwether Caterpillar jumping 2% in pre-market trade following an earnings beat.

The STOXX Europe 600 index wavered between moderate gains and losses, with the energy sector underperforming as Royal Dutch Shell fell more than 4% after missing profit projections by analysts, while crude oil continued to fall. Better-than-expected results for firms ranging from Anheuser-Busch to Nokia mitigated the impact of rising inflation fears. The majority of European bonds rose.

Flatter sovereign-yield curves are emphasizing growth concerns as pricing pressures exacerbated by an oil shortage and supply-chain snarls compel central banks to reduce stimulus.

Investors will look to the European Central Bank later today for assurances that rising prices are only temporary and will not spiral out of control.

Meanwhile, natural gas and electricity costs in Europe declined after Russia indicated it may increase gas shipments.

France's Macron informed Australian Prime Minister Morrison, Australia has broken the two countries' trust relationship.

China's Ministry of Commerce on the US revoking China Telecom license: The measure stifles cooperation and the US should fix its error.

Germany's Dihk predicts 3.6% GDP growth in 2022.

Germany's Dihk: 58% of enterprises view increased energy and raw material prices as a commercial concern (vs 42% previously)

Traders expect a rate rise of 20 BPS by the ECB in December 2022. - Sources

France detains a British trawler amid a fishing rights dispute - Sky.


Thursday FX Options Expiries

USD/BRL: 5.5000 ($396M), 5.4000 ($373M), 5.6000 ($300M)
USD/JPY: 113.00 ($1.47B), 113.75 ($980M), 113.70 ($735M)
EUR/USD: 1.1610 (EU915.6M), 1.1600 (EU665.2M), 1.1500 (EU577.6M)
USD/CAD: 1.2375 ($1.19B), 1.2660 ($970M), 1.2300 ($483M)
AUD/USD: 0.6500 (AUD1.38B), 0.7475 (AUD1.02B), 0.7375 (AUD654.8M)
USD/CNY: 6.3900 ($805M), 6.4570 ($500M)
USD/KRW: 1173.00 ($480M)