Equity rout continues; Yen higher on haven flows

Asian indices hit multi-month lows

The rout on Wall Street which saw indices lurch into negative territory for the year continued into today’s Asian session, pushing indices to multi-month lows. The Japan225 index fell 0.54% to the lowest in more than six months, while the HongKong33 index slumped 1.42% to a low not seen since May 2017. China shares pressed lower initially, giving back as much as 70% of the gains posted in the three-day rally from October 18, after support assurances were first made. Xinhua News reported that President Xi had said they were looking for ways to support small companies, and this was enough to pull the China index back into positive territory. It’s currently up 0.45%.

HongKong33 Daily Chart

Source: OANDA fxTrade

Yen bid on safe haven flows

The yen was one of the better performing currencies versus the US dollar in the Asian session as investors sought safe havens during the stock market drubbing. The US dollar gave back some of yesterday’s gains as the dollar index, the measure of the greenback’s value against six major currencies, retreated from more than two-month highs. The Aussie dollar outperformed the rest with gains of about 0.3%, according to Bloomberg calculations, with the pound lagging its peers due to the prolonged, unresolved Brexit issues.

USD/JPY Daily Chart

Source: OANDA fxTrade

Will the ECB stir more volatility?

While the European Central Bank is not expected to diverge from its already-announced path of winding down quantitative easing measures by year-end and not start hiking rates until after summer next year, the press conference could be interesting as Draghi gives his views on the recent spate of softer economic data. That comes at 12.30pm GMT.

Will ECB meeting be more eventful than expected?

Before the ECB, German October IFO sentiment surveys are due, and are expected to show weaker readings than September. Given the stock market rout and recent soft data, even those lower expectations could be vulnerable.

The US calendar features the final housing data for September, with pending home sales seen falling 0.1% m/m after a 1.8% decline in August. New home sales for September released yesterday showed the steepest month-on-month decline since January, while building permits for the same month, released mid-month, were their weakest in a year. Definite signs that the housing market is lagging behind the rest of the economy amid rising mortgage rates, and it could end up being a drag on growth going forward.

Durable goods orders for September completes the calendar along with speeches from the Fed’s Clarida (neutral, voter) and Mester (hawk, voter).

You can view the full MarketPulse calendar at https://www.marketpulse.com/economic-events/

Temperamental markets

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