Federal Reserve Chair Jerome Powell suggested the run-up in long-term Treasury yields could allow the central bank to suspend a historic run of interest-rate increases so long as recent progress on inflation continues. Powell’s remarks at a Thursday lunchtime address in New York closely tracked those of colleagues who indicated in recent days that they would hold short-term interest rates steady at their next meeting on Oct. 31-Nov. 1. That is in part because the swift rise in long-term rates over the past month could slow the economy, effectively substituting for another Fed hike if higher borrowing costs are sustained. “We have to let this play out and watch it, but for now, it is clearly a tightening in financial conditions,” Powell said. The whole point of raising interest rates is to “affect financial conditions, and higher bond rates are producing tighter financial conditions right now.”

Switzerland's trade surplus surged in the third quarter on recovering exports, data from the Federal Customs Administration showed on Thursday. The trade balance registered a surplus of CHF 10.54 billion, which was above CHF 9.49 billion logged in the second quarter. In the same period last year, the surplus was CHF 8.26 billion. In real terms, exports rebounded 0.8 percent, following a 1.6 percent drop a quarter ago. At the same time, the decline in imports softened to 0.6 percent from 3.2 percent. In September, the trade surplus rose to CHF 5.03 billion from CHF 3.13 billion in August, data showed. The monthly growth in exports advanced to 8.9 percent from 7.7 percent in August. Meanwhile, the growth in imports slowed to 0.3 percent from 4.3 percent. Another report from the Federation of the Swiss Watch Industry showed that watch exports increased 3.8 percent on a yearly basis to CHF 2.3 billion in September, despite a negative base effect.

European stocks traded lower on Thursday to extend losses from the previous session, as a slew of downbeat earnings updates added to jitters around the Middle East war and rising bond yields. Bond yields surged in Europe, with Germany's 10-year government bond yield, the benchmark for the euro area, rising 3 basis points (bps) to 2.95 percent ahead of Fed Chair Jerome Powell's speech later in the day. On a light day on the economic front, the European Central Bank reported that the euro area current account surplus increased in August driven by the sharp rise in the visible trade surplus. The pan European STOXX 600 fell 0.9 percent to 440.85 after losing 1.1 percent on Wednesday. The German DAX slipped 0.4 percent, France's CAC 40 was down 0.9 percent and the U.K.'s FTSE 100 fell 1 percent. Nestle shares fell 2.2 percent after the Swiss consumer giant posted lower-than-expected nine-month sales growth. Finnish telecom gear group Nokia tumbled 3.7 percent after posting a drop in its third-quarter sales and announcing job cuts. McBride shares jumped 22 percent. The British household and personal products business said that the favorable trading environment and momentum of the second half of fiscal 2023 has continued into the first quarter of fiscal 2024. Retail-investment platform Hargreaves Lansdown slumped 4.6 percent after new client growth slowed during the first quarter. Gold miner declined 2.4 percent after pretax profit and revenue fell in the third quarter. French carmaker Renault plunged over 7 percent after currency depreciations in Turkey and Argentina weighed heavily on the pace of sales growth in the third quarter. Pernod Ricard soared 5 percent after the spirts maker forecast higher sales in fiscal year 2023-24.

Stocks ultimately sank Thursday after being whipsawed by remarks from Federal Reserve Chair Jerome Powell. Powell’s comments jostled markets as investors were weighing bond yields’ ascent toward 5%, the continuing conflict between Israel and Hamas, and the influx of corporate earnings results from the third quarter. The S&P 500 dropped 0.8% with 10 of its 11 sectors finishing in the red. The tech-heavy Nasdaq Composite fell 1%, while the Dow industrials declined 0.7%. Powell initially suggested that the central bank is unlikely to raise interest rates again in November, a reprieve for investors. Stocks climbed and bond yields fell. He then spooked investors once his speech resumed, shortly after an interruption by climate activists, prompting a reversal. Traders struggled to discern a clear sense of direction from his comments. Stock investors were also gauging newly released third-quarter earnings results. Netflix shares leapt 16% after reporting it added 8.8 million net new paid subscribers, the biggest jump since early 2020, and raised prices. That was its best single-day performance since January 2021, making it the biggest gainer in the market on Thursday. Crackdowns on password sharing spurred the growth, but that has caused some analysts to question how sustainable it is. Tesla stock, meanwhile, went in reverse following its third-quarter results. Shares of the electric-car maker slid 9.3% after the company said it is struggling to scale production of the Cybertruck, and it lost more money than analysts expected. Shares of AT&T rose 6.6% after beating forecasts and raising its future outlook. Private-equity giant Blackstone fell 7.9% after it reported a war chest of more than $200 billion to invest in what is currently a stagnant market.

The East Asian and Australian stock exchanges show predominantly losses on Friday. South Korea (-1.4%) and Australia (-1.1%) are down particularly sharply. Concerns about higher costs for loans and oil also weigh on the Japanese market, sending the Nikkei down 0.3 per cent to 31,342 points. Inflation data, slightly higher than expected, failed to have an impact on the market. Among individual stocks, Daiichi Sankyo rises 12 per cent after announcing a multi-billion dollar deal with Merck & Co to jointly develop three cancer drugs.

The 10-year U.S. Treasury yield reached as high as 4.991% during trading, nearly hitting 5% for the first time since 2007. Weak manufacturing data from the Philadelphia area and later Powell’s comments sapped the bond selloff and boosted prices, leaving the benchmark yield at 4.987% to finish the day - a fresh 16-year high.

Barclays downgrades Easyjet to Equalweight (Overweight) – Target GBP 4.15 (5.50)
Deutsche Bank lowers Deutsche Lufthansa target to EUR 11 (13) – Buy
Barclays lowers NFon to Underweight (Equalweight) – Target EUR 5 (6.50)

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