Huge monetary tightening, currency interventions, crisis management QE, war, energy shocks and systemic risk have all been some of the market drivers in last few weeks of the third quarter. It seems many of these will continue into the final few months of the year, as central banks continue to fight sticky and elevated price pressures. Risk-off sentiment has seen major equity indices crumble into or just below major support levels. Rampant bond yields are consolidating just below their recent highs. The 4% marker in the benchmark 10-year US Treasury yield is key resistance to look out for.
We have the first Friday in the month so that means the latest release of the US non-farm payrolls report. There are few signs as yet of any major weakness in the labour market when looking at the more frequent weekly initial jobless claims number and high vacancies. This is the last jobs data before the next FOMC meeting right at the start of November. Any cooling down would probably be welcome by risk markets with the blue-chip S&P 500 equity index hitting bear market territory again. Dollar strength would also ease though the case for more Fed rate hikes should remain solid, plus the safe haven bid for the greenback is never far away in the current environment.
Much focus will remain on the UK. The words “sterling” and “gilt” were originated as a signal of quality and strength. But those ideals have been far from reality recently. Questions over the funding of the UK’s biggest tax cuts in 50 years still loom over the pound even as cable bounces back. What is the right price to fund the UK’s widening budget deficit? A crisis of confidence around policymakers remains, as the PM and Chancellor come under the spotlight at the Conservative Party conference.
Here are the main risk events on the calendar:
