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Markets Update – TradexSys DailyWatch – 19/10/2023

Good morning, Thursday, October 19th. We begin the day with the observation that government bond yields are impacting global financial markets. The 10-year yield rose yesterday to its highest level since 2007, reaching 4.96%. The 2-year yield has also significantly increased, reaching 5.25%. This rise in yields has had a negative impact on stock markets, with the S&P 500 losing 1.34% and the Nasdaq dropping 1.41%.

The negative trend has also been reflected in Asian markets, with the Nikkei down 1.90% and Hong Kong’s Hang Seng falling by 2.46%. In Europe, the EuroStoxx index opened rather flat, but the decline in American markets has affected European exchanges.

U.S. market futures are currently stable but are trying to rebound after recovering slightly from morning and overnight losses.

The price of oil has slightly weakened, dropping to $86 per barrel. The Euro, after dropping below $1.50, has returned to $1.0545 and is gaining ground.

It’s important to note that government bond yields, especially those of U.S. Treasuries, have an inversely proportional impact on stock market movements. The higher Treasury yields go, the more downward pressure is put on stock markets.

In the corporate earnings sector, Tesla and Netflix have reported contrasting results. Tesla fell short of expectations with earnings of $0.66 per share, below the expected $0.73, and revenue of $23.35 billion, lower than the anticipated $24.1 billion. Tesla’s operating margins have also decreased compared to the previous year.

In contrast, Netflix recorded a significant increase in subscriptions, with 8.76 million new subscribers in the quarter, surpassing expectations of around 5.5 million. Netflix’s earnings per share, at $3.73, have also exceeded the forecasted $3.49.

Furthermore, financial data from Taiwan Semiconductor Manufacturing Company (TSM), one of the world’s leading chip manufacturers alongside ASML, showed a decrease in revenue and profits compared to the previous year. However, these results exceeded consensus expectations, leading to a 2.80% increase in TSM’s stock.

Today, we await the results of American Express, but the market remains strongly influenced by U.S. Treasury yields. The performance of stock markets will likely depend on how these yields evolve. We’ll continue to monitor developments and provide updates tomorrow.


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