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Marketmind: Oil and bond yields try to find toehold

[November 09, 2023] A look at the day ahead in U.S. and global markets from Mike Dolan

With the more substantive of Federal Reserve Chair Jerome Powell's two appearances this week still to come, markets have stalled as the week's surprising plunge in oil prices and bond yields levelled off.

A fresh fall in China's consumer prices stoked deflationary fears there again and the global economic demand picture is starting to drag on commodity prices everywhere and is helping to defuse October's blistering spike in long-term borrowing rates.

The supply picture for U.S. crude, which is now down more than 20% from late September's peaks, has also weighed on energy prices.

Crude inventories increased by 11.9 million barrels over the week to Nov. 3, sources said, citing American Petroleum Institute figures. If confirmed, this would represent the biggest weekly build since February.

With the energy price drop improving the inflation picture, it has helped drag 10-year Treasury yields back down to their lowest since Sept. 26 - hovering just above 4.5% early on Thursday despite a mixed reception for new 10-year notes auctioned yesterday. Some $24 billion of 30-year bonds are up for grabs later in the day.

With senior Fed officials on Wednesday side-stepping guidance on the central bank's next policy steps, attention focuses squarely on Powell's latest speech.

Critical in the speech will how Powell characterizes the recent rollercoaster in bond yields and whether he protests in some way against market bets that the Fed will cut rates as soon as June.

It has left markets in a holding pattern first thing, with the S&P500 eking out an eighth straight gain to just under the 4,400 level on Wednesday and futures marginally up ahead of the open. The VIX recorded its lowest close since mid-September too and remains under 14.5 before today's bell.

Overseas markets were firmer too, helped by some positive earnings readouts in Europe and a warning from Chinese authorities about speculative activity in domestic stocks there.

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The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City, New York, U.S., March 9, 2020. REUTERS/Carlo Allegri

In corporate news, the focus was on the entertainment industry.

Hollywood actors reached a tentative agreement with major studios on Wednesday to resolve the second of two strikes that rocked the sector as writers and performers demanded higher pay in the streaming TV era.

Shares in Walt Disney were up almost 4% overnight after it exceeded Wall Street's earnings expectations, with higher attendance at its Shanghai and Hong Kong theme parks offsetting a decline in advertising revenue at television network ABC.

But Warner Bros Discovery plunged 19% on Wednesday after the media and entertainment conglomerate said the Hollywood strikes and a weak advertising market hurt its 2024 outlook.

Key developments that should provide more direction to U.S. markets later on Thursday:

* Federal Reserve Chair Jerome Powell speaks in Washington; Richmond Fed President Thomas Barkin, Atlanta Fed chief Raphael Bostic, St. Louis Interim Fed boss Kathleen O'Neill Paese all speak; European Central Bank President Christine Lagarde speaks in Brussels

* U.S. Treasury Secretary Janet Yellen opens two days of meetings with Chinese Vice Premier He Lifeng

* U.S. weekly jobless claims

* U.S. corporate earnings: News Corp, Wynn Resorts, Tapestry, Westrock, Illumina, Hologic, Mettler-Toledo, TransDigm, Becton Dickinson,

* U.S. Treasury auctions $24 billion of 30-year bonds

(By Mike Dolan, editing by Emelia Sithole-Matarise; mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)

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