Saikat Chatterjee gives a glimpse at what lies ahead.

Although there was some pre-Halloween drama, it hasn’t affected equity markets. The markets have surged despite the explosion of short-end government bonds yields. This week, however, the Nasdaq (tech-heavy) reached a new high.

Also, currency volatility has been close to its 2021 lowest point. Stock markets may be supported by strong third quarter earnings.

However, this may not last for very long. The shares of tech giants Apple (NASDAQ) and Amazon (NASDAQ) fell short of market expectations in the hours that followed.

This is weighing down Asian stocks Friday and MSCI’s ex Japan index could see three consecutive weeks of gains. The U.S. stock markets are expected to open in red.

After Christine Lagarde, President of the European Central Bank failed to put an end to bets about interest rate increases for 2022, Eurozone bond yields continue to climb. The Italian bond yields experienced their largest daily increase in more than a year, and they are expected to rise further Friday.

Her forecast that inflation would remain below target for the medium-term doesn’t seem to have pushed German inflation-linked 10 year bond yields much further away than the record-breaking low of Wednesday.

According to Citi strategist Matt King it could boil down into a “credibility deficit” between inflation & real yields. It has already been stretched its limits since the 1970s.

Policymakers face a problem when this gap is not closed. For example, in Australia officials appear to have lost control over the yield target that is key to central bank stimulus policies. Bonds saw the largest selloff in years, and market participants are clamoring for rates hikes by April.

As the weekend draws near, things seem to be calmer; the dollar is stronger, the advance 1%, and China’s cripple Evergrande has paid interest on an offshore bond. This makes it the second consecutive week that it avoids default.

Markets should be more informed by Friday’s key developments

Daimler AG (DE:), which reported higher net profits in Q3, despite a 25 percent reduction in production, expects to meet profit targets.

Ether, second-largest cryptocurrency in the world, hit an all time high of $4,400

Data corner: Preliminary Q3 GDP readings – Eurozone, Germany France, Italy

ExxonMobil (NYSE 🙂 Corporate earnings Chevron (NYSE:), Natwest Group, BNP Paribas (OTC:)

(For graphic on bonds – https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnoalopq/Aussie%20bonds.JPG)