US consumer confidence bucks covid worries

Edward Bell - Senior Director, Market Economics
Published Date: 27 October 2021

 

  • Data out of major economies was limited overnight with financial markets looking ahead to the end of the week for central bank decisions from G-7 economies. In the US the Conference Board’s consumer confidence index increased for October, its first gain in four months and at 113.8 was stronger than market expectations looking for a decline. Consumers remain optimistic on the outlook for the economy and seem to be putting aside fears of the spread of the delta variant of Covid-19.
  • In Australia inflation accelerated to 3% y/y in Q3 while core price growth moved to the RBA’s target range of 2-3% for the first time since 2015. The gains were largely down to increase in housing and fuel prices while non-tradeable consumer prices, reflecting more regular consumer purchases rose by 0.9%. The spread of inflationary pressures is increasingly global and may prompt more and more central banks to normalize policy in an abrupt fashion, threatening an orderly exit out of Covid-19 pandemic conditions.

Today’s Economic Data and Events

16:30 US Durable goods orders Sept: forecast -1.1%

18:00 CA BoC Rate decision: forecast 0.25%

Fixed Income

  • There were few fundamental catalysts to affect fixed income markets overnight and hence market moves showed little conviction in either direction. Yields on 2yr USTs were moderately higher at 0.4396% while the 10yr yield dipped by 2bps to 1.6079%. Bund yields were flat while in the UK gilt yields moved lower.
  • South Africa was the standout among emerging market bonds, with yields up almost 20bps overnight to move above the 10% level. Moves in Turkish and Indian 10yr local currency bonds were more muted.
  • Emirates Islamic priced a 5yr USD 500m sukuk with a profit rate of 2.082%, 80bps over MS.

FX

  • The dollar extended its gains into Tuesday with the DXY index up by 0.14% to 93.949. USDJPY provided much of the gains with the pair rising by 0.4% to 114.16 while EURUSD moved back below the 1.15 level again, down 0.1%.
  • Elsewhere price action was more limited with USDCAD holding roughly steady while AUD was the notable gainer among commodity currencies, up 0.13% to 0.7501.

Equities

  • Equities were generally stronger overnight although US gains were more limited. The S&P 500 rosed 0.18% while the Dow and NASDAQ saw more muted gains. In Europe the EuroStoxx 50 added 0.85% while the FTSE managed a gain of almost 0.8% overnight.
  • In early trade today, Asian benchmarks are lower with the Nikkei down 0.8% while the Hang Seng has given up close to 1.7%.
  • Regional markets generally appeared weaker with the DFM the only exception and only grudgingly positive. The Abu Dhabi exchange fell 0.39% while the Tadawul fell 0.36%.

Commodities

  • After another day of gains overnight—Brent up 0.48% to USD 86.40/b and WTI adding more than 1% to USD 84.65/b—oil prices are edging lower in early trade today. The API reported a build in total US crude stocks of 2.3m bbl and also gains in both gasoline and distillates.
  • The CEO of Aramco highlighted the drop in oil output capacity was a “huge concern” and that it could be depleted further next year. The comments come somewhat at odds with views from the energy minister in Saudi Arabia that noted there could be a decent increase in crude inventories in 2022.

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