Economic Resilience Fuels Dollar Strength, Equities Mixed
A robust retail sales report in September has sent shockwaves through the financial markets, leading to a surge in Treasury yields and a strengthening of the US dollar. The data has also trimmed expectations for US rate cuts, with swaps traders reducing bets on Federal Reserve rate cuts in the remaining two meetings of the year.
US Economy Shows Signs of Vigor
The retail sales data, which exceeded expectations, illustrates the resilience of consumer spending, a key driver of the economy. This follows a strong jobs report and a hotter-than-estimated consumer inflation print released earlier this month, reinforcing the view that the US is nowhere near a recession.
Global Markets React
In Asia, investors are focused on China, with gross domestic product data for the third quarter expected to reveal the slowest pace of growth in six quarters. Meanwhile, Australian and New Zealand yields climbed in early Friday trading, tracking the moves in Treasury yields. Japanese equities advanced, helped by a weaker yen, while US futures were slightly higher.
Corporate News: Winners and Losers
Taiwan Semiconductor Manufacturing Co. touched a record high after topping quarterly estimates and raising its target for 2024 revenue growth. Nvidia Corp shares rallied, while Netflix Inc.’s stock climbed in late trading as subscriber additions beat estimates. Travelers Cos. surged 9% on profit that tripled to $1.3 billion from a year earlier. However, Elevance Health Inc. tumbled 11% as the insurer cut its annual outlook.
Experts Weigh In
“The retail sales data highlight undeniable strength across the economy,” said Ellen Zentner at Morgan Stanley Wealth Management. “Strong data will encourage some pushback from Fed participants to cutting again in November, but Chair Jerome Powell is unlikely to be swayed from forging ahead with steady, quarter-point moves.”
Commodities and Currencies
Gold climbed to a fresh record amid ongoing tensions in the Middle East, while West Texas Intermediate, the US crude price, edged higher to trade around $71 per dollar. The Bloomberg Dollar Spot Index was little changed, while the euro and Japanese yen were also steady.
Key Events This Week
Investors will be closely watching China’s GDP data, US housing starts, and speeches by Fed officials Christopher Waller and Neel Kashkari.
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