S&P 500 Rises Amidst Yield Pause, Yen Finds Relief as Labor Market Takes Center Stage | Daily Market Analysis

Key events:

• Eurozone - ECB's Lane Speaks
• USA - Initial Jobless Claims
• USA - FOMC Member Mester Speaks
• Eurozone - ECB's De Guindos Speaks           
• USA - FOMC Member Daly Speaks
• USA - Fed's Balance Sheet

On Wednesday, the S&P 500 experienced a rise, with the increase in Treasury yields coming to a halt. This pause in yields was driven by data indicating a slowdown in private job growth to a 32-month low. This development eased concerns somewhat regarding the possibility of the Federal Reserve raising interest rates before the end of the year.

The S&P 500 saw a 0.7% increase, while the Dow Jones Industrial Average gained 0.3% or 104 points, and the Nasdaq surged by 1.3%.

The retreat in yields also contributed to the rebound of US markets, putting an end to a three-day losing streak. The most significant decline was observed in the 2-year yield, which fell by 10 points.

This resurgence in US markets had a ripple effect on Asian markets and is poised to have a positive impact on European markets as well. This comes as investors await the release of the latest German trade import and export data for August, along with French industrial and manufacturing production data, both of which are expected to reveal weak economic performance.

At the same time, FTSE100 slid for the third day in succession due to a sharp slide in commodity prices, which weighed on the big caps of basic resources and energy.

Growth sectors of the market, including the technology sector, regained momentum, supported by the easing Treasury yields. Leading the way were Alphabet Inc Class A (NASDAQ: GOOGL) and Microsoft Corporation (NASDAQ: MSFT).

Intel (NASDAQ: INTC) also saw a rise after outlining plans on Tuesday to separate its programmable chip business into a standalone entity starting on January 1, paving the way for an initial public offering in the next two to three years. This move indicates that Intel is actively restructuring its assets through shareholder-friendly strategies, potentially creating more value in the future.

On Thursday, the yen received some much-needed relief as the dollar stabilized and US Treasury yields moderated. This followed mixed US economic data that led investors to scale back their bets on the Federal Reserve raising interest rates again this year.

The dollar index, which tracks the US dollar against six major currencies, remained near its overnight level at 106.53.

The greenback gave up some recent gains after the ADP National Employment Report on Wednesday revealed that US private payrolls increased less than expected in September. However, analysts noted that more evidence was needed to determine the speed at which the labor market is cooling.

The dollar/yen currency pair, which is sensitive to US yields, traded around 148.43, marking a nearly 0.5% decline from late US levels. This pushed the yen further away from its weakest point since October 2022, which it reached earlier this week at 150.165.

Speculation about possible intervention by Japanese authorities arose as the yen experienced a sharp recovery after crossing the 150-line on Tuesday. However, data from the Bank of Japan's money market suggested that Japan had most likely not intervened. Finance Minister Shunichi Suzuki declined to comment on whether Tokyo had intervened and emphasized the importance of currency rates reflecting economic fundamentals in a stable manner.

In the Asian markets, the euro has seen a 0.18% increase, reaching $1.0524, staying above this week's recent low of $1.0448.

According to a Reuters poll involving 20 analysts, the consensus view regarding how low the euro will go this month stands at $1.04, with only one respondent suggesting that the currency might touch parity.

The focus in the financial world is expected to remain on the US labor market today and tomorrow. Tomorrow's release of the September non-farm payrolls report, following yesterday's slowdown in the ADP numbers, could either confirm the likelihood of another interest rate hike in November or leave markets uncertain ahead of next week's Consumer Price Index (CPI) report.

Before that, later today, we will receive the latest weekly jobless claims numbers. These are anticipated to indicate a slight increase in claims from 204,000 to 210,000. Meanwhile, continuing claims are expected to remain steady at 1.67 million.