S&P 500: Futures recover part of Thursday’s decline, bonds continue to rise

• Wall Street futures rise after Thursday’s sharp drop.
• In Europe, the main stock markets operate in green.
• The dollar tries to cut negative streak of two days.

Equity markets are rising on Friday, bouncing back after Thursday’s decline. Volatility remains firm and elevated, with significant mood swings in the markets. The dollar validates weekly losses although it appreciated in the last hours. Metals lost steam after hitting one-week highs.

Stocks recover, volatility continues

The S&P 500 lost 2.10% on Thursday and in the previous Friday, the last day of September and the third quarter, it rose 0.40%. Volatility remains high, although with a better mood in the equity markets due to a rise in sovereign bonds.

The US 10-year bond yields 3.69%, a one-week low, and the German benchmark falls more than 6% to 2.07%. The British title is at 4.03%, in the range of recent sessions.

Russian President Vladimir Putin signed the decree recognizing the independence of two regions of Ukraine. The unilateral annexation of four Ukrainian regions is now expected to take place within hours.

In the US, the August Personal Income and Expenditure report will be released on Friday, which includes the Personal Consumption Expenditure Price Index, a closely watched measure of inflation that may have an impact on markets. The Chicago PMI for September and the final consumer confidence report for September from the University of Michigan will also be released. Several Federal Reserve officials including Lael Brainard, John Williams, and Thomas Barkin will speak out.

Chinese data for September was mixed with the official Manufacturing PMI at 50.1 improving from 49.4, but non-manufacturing fell from 52.6 to 50.6.

The dollar wakes up

In the last hours, the dollar started to recover ground, particularly against the G10 currencies. It is leaving behind two days with strong declines, but the rebound still does not look firm. The dollar’s better performance is also dragging down metals, which are down from one-week highs. XAU/USD is down $10 from the $1674 peak while XAG/USD is testing levels below $19.00.

DXY advanced 0.60%, even despite lower Treasury yields. In Europe, bonds are also recovering even at a faster rate. EUR/USD falls after failing to break above 0.9850. The data on inflation in the Eurozone, reaching a record 10% in August, did not generate any major surprises.

The situation in the United Kingdom continues to be of great attention. On Wednesday the announcement of Bank of England of buying long-term bonds temporarily without limits generated, to stop the collapse of titles and of the pound had an impact, which still lasts. But this did not remove the political weakness of Prime Minister Liz Truss and the economic plan. She met today with the head of the tax watchdog. On the positive side, there was a revision of the UK growth figures for the second quarter, which went from contracting 0.2% to expanding 0.2%.

The British bonds look relatively stable, with the 10-year rate holding above 4.00%. The pound is still far from the lows. GBP/USD is around 1.1050 after reaching levels above 1.1200, almost 1000 pips above Monday’s low. EUR/GBP fell to 0.8750.

After a sharp appreciation on Thursday, the Chinese yuan is falling again against the dollar. The USD/CNH is above 7.1000. The worst performing currency on Friday is being the Kiwi (NZD). The Mexican peso remains firm, with USD/MXN in the 20.10 area, after Banxico’s interest rate hike of 75 basis points on Thursday to a record level of 9.25%.

Oil prices rise modestly and remain in the price zone of recent sessions. The barrel of WTI is at $81.70. Speculation arose about a production cut of between 500,000 and a million barrels by the Organization of the Petroleum Exporting Countries and its allies.

Cryptocurrencies operate stable. Bitcoin remains near $19,500 and Ethereum at $1,340.

Technical levels