US Stocks rallied, 10-year treasury fell below 3.7%

　　

U.S. stocks rallied on the first trading day of the month. The Dow Jones Industrial Average rose 765.38 points to close at 29,490.89. The S&P 500 gained 2.6% to close at 3678.43. The Nasdaq Composite rose 2.3% to close at 10,815.43. The benchmark U.S. 10-year treasury yield fell below 3.7% and was last seen trading at 3.67%. The receding treasury yield allowed a rare day of gains for equities; furthermore, after a month of losses, equities entered a revival rally over the 3^rd. Among the S&P 500 index, the energy sector gained the most as utility stocks benefit from the falling bond yield.

Shares of Credit Suisse took a plunge of as much as 10% on Monday as reports have surfaced that the bank has tremendous exposure to credit default swaps that were previously undisclosed. Internal memos from Credit Suisse management have surfaced that the bank is looking to raise capital in order to cover CDS exposure. Similar to the 2008 credit crisis, Credit Suisse now faces a challenge to raise funds under tight money market conditions; however, other banks have reiterated their credit health and pointed out that Credit Suisse stands alone in this turmoil. Talks of asset sales and potential divestitures have been brought to the table.

Main Pairs Movement

The Dollar Index fell 0.46% over the course of yesterday’s trading. The Greenback fell amid falling bond yields; furthermore, the rallying equity market has attracted cash flow from market participants.

EURUSD climbed 0.25% over the course of yesterday’s trading and closed at a fresh weekly high. Parity is now fully in play as the Euro continues to take advantage of the weaker Dollar.

Cable rose 1.48% over the course of yesterday’s trading. The British Pound has extended its four-day winning streak as the downbeat U.S. PMI data dragged the Dollar lower.

XAUUSD closed at around the $1,700 per ounce price level as the Dollar denominated asset attracted bidding while bond yields retreated. The lower-than-expected PMI release from the U.S. has decreased market bets on a super-sized interest rate hike by the Fed.

Economic Data

Currency	Data	Time (GMT + 8)	Forecast
AUD	RBA Interest Rate Decision (Oct)	11:30	2.85%
AUD	RBA Rate Statement	11:30
USD	JOLTs Job Openings (Aug)	22:00	10.775M
EUR	ECB President Lagarde Speaks	23:00
USD	Core PCE Price Index (Aug)	20:30	0.5%