Global equity markets are closing another strong month. The MSCI Asia Pacific Index was little changed on the day, but up 4.3% in October, the 10th consecutive monthly advance. l equity markets are closing another strong month. The MSCI Asia Pacific Index was little changed on the day, but up 4.3% in October, the 10th consecutive monthly advance. Europe’s Dow Jones Stoxx 600 is also flattish today, but up 1.6% on the month. It is the second monthly advance after a June-August swoon. The benchmark is closing in on the high for the year set in May. The S&P 500 made new record highs at the end of last week. Coming into today’s session, the S&P 500 is up 2.1% on the month, and since last October, has only posted a single losing month (March-0.04%).  

While global equity markets rally, seemingly no matter what, the bonds and currencies know more than one direction. The US 10-year yield recorded the low for the year just above 2.0% in early September. It has since risen to around 2.47% and has backed off in recent sessions. A few attempts in Q2-Q3 to push above this area have failed. We suggested that a move below around 2.35% would spur ideas that this recent attempt has also failed. This area was approached earlier today, and it held.  

Interest rate differentials have moved against the US dollar in Q2-Q3 but have moved more forcefully in the dollar’s direction recently.  The dollar is likely to close higher against all the major currencies this month.However, here the too market is testing key levels. For example, the $1.1600-$1.1660 band in the euro is important, and while the euro had edged into the high $1.1500s, but the break has not yet been convincing. A convincing break would suggest losses toward $1.1250. On the other hand, if it holds, another the euro can recover back to $1.18, if not higher.  

The dollar has been turned back from the JPY114 area in May and July, and again probed this area last week.The poor price action ahead of the weekend warned of the risk of a setback, we thought, toward JPY113.00. This was tested earlier today and it, reinforced by the 20-day moving average (~JPY112.90), held.