Summary:

• The European equity markets have gained so far while the US dollar has been the strongest currency in G10
• German and US bonds take a breather, yields’ gains affect the FX market
• GBP in a slight retreat following a mixed bag of the labor market data

The beginning of the Chinese Communist Party Congress has coincided with an increase across the global equity markets thus far even as the President Xi Jinping offered little during his opening speech. In this respect, it’s worth underlining that in the past the CHNComp slid 3% during the Congress on last 3 occasions and another 3% in the week to follow. That’s a 6% correction!  Should it occurs again, it could take the Chinese index down to a lower limit of the channel that’s been encompassing the bull market so far this year.

As far as the FX market is concerned, the US dollar has been the strongest currency in the G10 basket so far (except the Canadian dollar which is being buttressed by rising oil prices). The increase of the greenback is also reflected in the bond market where the US 10Y yield is climbing almost 3bps in less than two hours before the Wall Street’s opening. On the other hand, the Japanese yen along with the NZ dollar are among the poorest performers losing 0.5% against the USD. The former could lose on the back of improving risk sentiment, in turn the latter is still being depressed by political tailspin as a new government has yet to be forged. The euro is hanging around 1.1750 and a further decrease is being constrained by a 2bps increase in the German 10Y yield. Finally, the GBP sticks to the breakeven line being just marginally lower despite a pick-up in the UK 10Y yield (+3bps) which is a response to mounting expectations as for a possible rate hike in November mostly due to lofty inflationary pressures even as real wage growth remains sub-par.

The major European equity markets have started the day slightly firmer following the strong Asian session where the Chinese President Xi Jinping delivered his opening speech to the Party’s Congress. Taking a look at the European stock markets one may notice that the German index has been unable to move higher in a more durable manner as a result it’s still hovering around 13000 points. Beside the DE30 we’ve already provided a technical analysis of other indices as well.

It seems that after a period without heightened volatility across major digital currencies things are changing with all on them falling today. Bitcoin is already down more than 5% and it’s hovering around $5300. Let’s notice that BTC failed to establish its new all-time high above $5800 so a corrective move appears to be natural. A quick look at the snapshot below illustrates that investors are interested in cashing in on their recent longs.

Looking ahead, the US data-wise is quite listless today with just two readings pertaining to the housing market. However, oil prices could be more shaky in the afternoon because of a weekly report on a change in oil stockpiles.