• US, Iran discuss phased deal to reopen Hormuz and end US blockade
• President Trump hails ‘truly great friendship’ with China’s President Xi
• Global bond rout brings highest US 30-year Treasury yield since 2004
• Meta hits fresh cycle highs as analysts say its cracked consumer AI formula  

FX Analysis

USD advanced for a fourth straight day, with the Dollar Index now overbought on several momentum indicators. Higher crude prices pushed up bond yields, though they closed off their highs on hopes of a phased US-Iran deal. The 10-year Treasury is now at levels last seen in July 2007. Having blitzed through the 5% mark, the next major level sits around 5.25%. As for the Dollar Index, July highs sit around 101.64 and the year-to-date top from June at 101.80. That’s a bull target if we do overextend. We had more hawkish Fedspeak. The Trump-Xi summit was a focus but didn’t yield anything substantive for markets. An extension of the trade truce by two months was announced.

EUR slid near to the late July low at 1.1353. Below here is the longer-term bottom from June at 1.1324. Rising energy prices are not helping the single currency, aside from widening rate differentials. Germany’s IFO Business Survey improved a little more than expected in September. But we note that this sentiment data has diverged from German GDP since 2024.

GBP was softer though outperformed its peers (except the euro) versus the dollar. Prices are now even more oversold with bears eyeing up the mid-March low at 1.3212 and late March trough at 1.3159. Those come ahead of the longer-term bottom from June at 1.3138. The BoE’s Dhingra was relatively dovish which was entirely expected, while the Deputy BoE Governor warned that tighter policy is likely if energy prices remain high.

JPY weakened for a fifth day in a row as the major broke above the 200-day SMA at 158.43. It also rose above the 50-day SMA is at 158.70. The September high and rebound top from after intervention sits at 160.39. This sharp yen weakening may prompt jawboning and more from Tokyo to steady losses. We are watching the wires for any chatter from MoF officials and the US Treasury too, especially after recent rate checking.

Stock Market Analysis

US stocks: The S&P 500 was down 0.02% at 7,704. The Nasdaq closed very marginally higher by 0.03% at 30,479. The Dow Jones settled lower by 0.31% at 5`1,355.  Communication Services, Health Care and Energy were the only three sectors in the green while the main laggards were Utilities, Materials and Consumer Staples.  Meta climbed another 4.5% as it unveiled a small handheld gadget with its Muse AI assistant. Oracle fell 3.5% after its huge ‘project Jupiter’ data centre declared a force majeure, jeopardising the entire US AI rollout. Darden Restaurants slid 3% after it said higher food and labour costs weighed on profits.

Asian Stocks: Futures are mixed. APAC stocks sold off as traders eyed strong US data, hawkish Fedspeak and rising bond yields. The ASX 200 was softer led by mining and materials weakness. Mixed jobs data included an unexpected rise in the jobless rate to a five-year high. The Nikkei 225 outperformed after its long weekend as tech names caught up with recent AI momentum. The Hang Seng and Shanghai Comp retreated even with relative optimism over the Trump-Xi summit and the trade truce extension until January.

Gold & Silver Analysis

Gold saw selling for a second day as prices eased near to the September low around $4,234. Prices are off close to 9.5% since the late august high at $4,697. As we have said, higher yields make non-yielding precious metals less attractive. A week close below $4,234 likely sees more downside unless yields steady. Silver has followed gold’s price action with initial support around $62.31.

Chart of the Day – Crude nears recent highs

Higher oil prices are causing ructions again in markets. Investors have started to fret about rising inflation which has seen a jump in Treasury yields in recent days. Historic levels and moves in the bond markets are something to be aware of, as these often lead other markets. In simple terms, the 30-year yield hitting multi-decade highs mean rates are seen staying higher for longer. Much is dependent on energy-related risks. That is not geopolitical risk itself but the impact on monetary policy and growth. This concern is now trumping stellar US data like Wednesday’s ISM figures.

Brent prices dipped to the midpoint of this year’s high to low move at $95.35. The major Fib (61.8%) sits at $101.29 with the September swing high at $107.03. Initial support below the 50% retrace level resides at the next major Fib (38.2%) at $89.40. Listen out for headlines, with yesterday’s more positive Reuters report – a potential Hormuz opening after the November elections – giving a glimmer hope for lower prices going forward. That said, other doubts over diplomacy is the ongoing conflict between the Houthis and Saudis.