After what has been a solid month for equities and bond investors, month end flows have probably play their part in the price action overnight, US equities have lost momentum, UST have led a rise in core global bond yields and the USD is stronger. US and European inflation releases favoured the notion the Fed and ECB are done with their respective tightening cycles.
Bond markets have been supported by some market-friendly data and while Fed speakers were again mixed, it was the more dovish remarks that captured attention.
Fed's Waller inches open the US rate cut door
Insights, Trends & Case Studies
US and European markets have begun the new week a subdued mood. But core global bond yields are showing some life, lower across the board while the USD is a tad softer too
The Aussie dollar came within kissing distance of 66 US cents on Friday
UK best Eurozone on the PMI front in Thanksgiving- thinned markets
Todays podcast US data not supportive of Fed’s inflation quest US Jobless claims fall well below expectations Final U of Michigan inflation expectations revised up UST curve bear flattens. 2y up 6bps to 4.93% US equities ignore data and keep marching higher Oil slips on news OPEC + meeting delayed. Saudis not happy USD […]
The FOMC Minutes out 6am Sydney time didn’t do much to excite markets. The euro is a little weaker over the past 24 hours, while the equity market rally has lost some steam.
US equities start the new week in a positive mood, the USD has remained under pressure and after initially edging higher, longer dated UST yields edge lower supported by a well-received 20y Bond auction.
Another choppy night on bond markets with 10yr yields on net little changed and the curve twist flattening slightly.
A choppy session with softer-than expected second-tier US data seeing yields fall, while the USD gained smalls and commodity currencies underperformed
It was a busy 24 hours for data flow globally. Yields partially retraced yesterday’s post-CPI bond rally, while equities have held onto gains.
US CPI came in a tenth below consensus on both the headline and core rates, leaving yields sharply lower, the USD weaker, and equities higher.
Subdued start to the week ahead of US CPI tonight
US equities recorded a solid end to the week with the S&P 500 closing above the 4400 psychological mark. Equity investors showed little reaction to news of a downbeat consumer
Two events late in the session dominated price action. The first was a poorly received US 30yr Treasury auction. The second was not dovish comments by Powell who sounded still hawkish.
Oil prices down again as demand pessimism deepens
Quiet data wise, but some notable moves in markets.
It was a quiet start to the week for news flow, which was mostly reflected in market movements, though yields are generally higher.
Risk assets had a solid end to the week with softer US economic data releases fuelling the notion that the Fed is done with the current tightening cycle. Front end yields led a rally in UST yields while the USD extended its decline to a third consecutive day.
Risk-on continues in the wake of Wednesday’s FOMC meeting as investors price the aggressive monetary hiking cycle as being closer to the end.
The FOMC was on hold as expected. Yields are lower, though most of the moves came ahead of the Fed with soft US data.
Japanese Yen slumps after only minor BoJ policy tweaks
Risk sentiment started the week on firmer footing. Equities are higher, the US dollar is lower, and US yields were higher. Brent oil lost 3%, back below $88 a barrel.
European and US equities ended the week with a cautious tone. The S&P 500 extended its weekly decline to 2.53% and entering correction territory in the process. Weekend news that Israel has begun a ground invasion of Gaza suggest markets are likely to retain a cautious tone at the start of the new week.
Risk sentiment remained fragile overnight with equities extending recent losses with disappointing earnings outlooks from major tech companies, despite mostly beating on current quarter earnings.
US equities are lower led by the tech heavy NASDAQ index and not helped by a new surge in UST yields. The USD extended yesterday’s gains with the AUD at the bottom of the G10 board, reversing its post CPI gains.
Weaker European PMIs, and potentially some unwind of yesterday’s move, have seen a stronger US dollar the main mover overnight, up 0.7% on the DXY.
A quiet night for data, but a big night for bonds.
Close but no cigar – US 10 year bonds traded to as high as 4.99% on Friday
Fed Chair Powell’s remarks have seen a choppy market response and a steeper curve, but against a backdrop of weak risk sentiment
Higher US yields and 'risk-off' tone see AUD's hard-fought gains undone
Strong US retail sales sees yields rocket – 10yr yield +14bps to 4.84%
Todays podcast Positive risk appetite to kick off the new week Equities higher, S&P500 +1.1% Yields higher, US 10yr +9bp to 4.70% Dollar loses 0.4% on the DXY with AUD an outperformer, +0.8% to 0.6344 Coming up: NZ CPI, RBA Minutes, US Retail, CA CPI, UK Wages, FED & ECB speakers Events round-up NZ: Performance […]
US CPI reverses much of the earlier week market moves
Global markets were relatively stable overnight ahead of tonight’s key risk event of US CPI.
Lower US bond yields and softer US dollar lift AUD back above 0.64
Reaction to the Israel-Hamas conflict triggers a spike in energy prices while German Bunds lead a rally in European bonds with US Treasury futures also pointing to a decline in US Treasury yields. Not all the initial moves have been sustained. The USD is little changed, AUD is up, after being down with Fed speakers favouring holding rather than hiking rates, helping US equities rally while European shares fall.
Stronger than expected payrolls data initially saw yields sharply higher, equities lower, and the USD stronger, though with the unemployment rate steady and earnings growth moderating, those moves were retraced.
Markets mark time ahead of payrolls tonight. Core global yields trade in narrow ranges, the USD loses a bit of altitude while US equities end the day little changed.
The bond sell-off that dominated the early part of the week has been put on pause. Why? NAB’s Taylor Nugent says there are a number of factors, but it’s tomorrow’s non-farm payrolls that will really set the direction for early next week.
A better-than-expected US JOLT report provided rattled markets. US Treasuries led a rise in core global bond yields, equities traded lower and the USD was stronger. USD/JPY gapped lower ( official intervention?) and AUD was the notable underperformer.
The sell-off in global bonds continued with fresh cycle highs being set for longer-term yields. The
Todays Podcast UK gilts lead global bond yields higher, Italy and France also up a lot, budget news hurts Treasuries recoil ~10bps from new (4.685%) high ahead of expected government shutdown tomorrow This plus reduced UAW pay demands, news of possible Xi-Biden meet, boosts US equity sentiment, AUD/USD recovers more than 1% of recent losses […]
The bond selloff continued overnight in what was a very quiet night for newsflow. The US 10yr hit a 16yr high of 4.55%, now 4.53%, and up some 11.2bps over the past 24 hours.
The path of central banks does seem to be having as many twists and turns as a Dickensian novel. NAB’s Ray Attrill says the path of bond yields at the end of the week showed how the UK is taking a divergent path from the US, where central bank speakers are still suggesting there will be more hike(s) to come.
The BoE is the latest to put rates on hold. But are they done? JBWere’s Sally Auld says its not safe to assume it’s over for any central bank.
Todays podcast ECB opts to hike, but taken as dovish with guidance read as a peak in rates Euro -0.8% and European yields are lower US Retail Sales data stronger in August, though offset by revisions AU Employment bounced in August Coming up: China Activity & MLF rate, NZ Manufacturing PMI, US UMich confidence […]
It was a subdued market reaction to the highly anticipated US CPI print.
Ahead of US CPI tonight, oil prices have ratcheted higher as OPEC+ cuts continue to bite
Todays podcast Tesla leads gains within in US equities Core global yields tick higher USD broadly weaker with JPY and CNY the notable movers JPY gains following Ueda’s interview suggesting openness to policy move this year CNY gains on PBoC strong fix, push against speculators and better data AUD and NZD benefit from spill over […]
US equities manage a marginal gain on Friday, but lower over the week and yields edge higher.
Yields are generally lower globally after a boost to US 2-year yields from lower jobless claims proved short-lived while equities declined.
A rise in Services activity last month confirms the US economy still sits firmly on top of the world
In this Weekly, we take stock of progress rebalancing labour markets in the US and Australia, finding significant progress has been made on a range of indicators even without a sizeable lift in unemployment rates
A softer Caixin Services PMI soured the mood yesterday, with the USD broadly stronger and the AUD the worst G10 performer
It has been a quiet start to the week in Europe and the US with the latter out celebrating Labor Day. US equity futures closed little changed while US Treasury futures are pointing to some small upside pressure on yields.
Neither the Fed nor President Biden could have scripted Friday’s US payrolls report any better had they tried
Overnight, the BoE’s Pill references ‘Matterhorn’ versus ‘Table Top Mountain’ approaches to monetary policy
US equities extend their positive run to a fourth consecutive day with softer US economic data fuelling expectations of a Fed on hold over coming months. UST yields edged lower while European yields rose following stronger than expected German and Spanish inflation data releases. The USD lost ground against EU pairs while the AUD is little changed.
The new report asks 800-900 Australian corporates across the non-farm business sector (who may or may not be NAB customers) on their progress, plans and strategies to achieve net zero greenhouse gas emissions.
Softer US consumer confidence and a JOLTs report suggesting ongoing rebalancing in the labour market saw the US dollar and US yields lower, while equities were higher.
Aussie retail sales were stronger than expected in July, but World Cup fever was a factor says NAB’s Ray Attrill
Fed Chair Powell’s speech at Jackson Hole did not break new ground. US equities closed the day in positive territory with both the S&P 500 and the NASDAQ recording their first positive week since July. The UST curve flatten with front end yields ticking higher while the USD closed a tad stronger.
Caution prevails in front of Jackson Hole; stocks down, bond yields back up, AUD back lower
Yields were generally lower globally as PMI data came in softer than expectations, with deterioration most pronounced in German Services. The AUD was stronger, as were US equities, with tech leading once again ahead of much anticipated earnings from Nvidia.
US equities traded in and out of positive territory, essentially marking time ahead of NVIDIA’s reporting tomorrow and Fed Chair Powell’s speech on Friday. It was also a quiet FX session while in rates 10y UST yields printed a fresh 16-year high before consolidating.
US yields resumed their grind higher to start the new week, though there was little news to speak of, while US equities where higher.
Yields lower on Friday, but still close to recent cycle highs
It’s been onwards and upwards for global bond yields overnight, and AUD has spent time below 64 cents
Todays podcast FOMC Minutes show concern about upside risks to inflation US yields higher led by 5bp rise in 10yr Equities were lower, S&P500 -0.8% with declines late in the session Asia equities weighed by China concerns AUD -0.5% against a broadly stronger dollar at 0.6421 Coming up: AU Employment, NZ PPI, JN Machinery Orders, […]
A stark contrast Tuesday between strong US retail sales and very weak China data
US equities started the new week on a positive note, notwithstanding a negative lead from Asia. Core global yields have continued their ascendancy while the USD is broadly stronger with negative China sentiment weighing on the AUD and NZD
A higher-than-expected US PPI print contributed to higher yields, while equities ended the week on a muted note.
US Core CPI just 0.160% m/m and 3m annualised rate now 3.1%
Ahead of the July US CPI release tonight US equities closed on the back foot. Oil prices extend recent gains while LNG prices surge following news Australian workers vote to strike. Quiet night in FX land.
Risk appetite has been weighed over the past 24 hours by a trio of soft China data, a surprise ‘windfall’ tax on bank profits in Italy, and a downgrade of a number of small and mid-sized banks by Moody’s.
Northern hemisphere summer holidays and a lack of data has seen markets treading water ahead of US CPI figures on Thursday.
Bond sell-off reverses on softer US payrolls
BoE lifts Bank Rate by 25bps to 5.25% as expected, to limited market reaction. US payrolls tonight
Yields rise, US 10yr hits 4.12% before easing back to 4.08%, highest since Nov 2022
The US Treasury curve bear steepened following news the US government will increase its bond issuance by more than previously thought. US equities recorded small declines and the USD is stronger across the board with the AUD the notable underperformer, RBA on hold and underwhelming China data not helpful.
Markets were generally quiet to start to week ahead of key risk events later in the week (BoE Thursday, US ISM Services Thursday, US Payrolls Friday).
Friday’s BoJ announcements made a bigger initial impression on global bond markets than FX
Not much reaction to the ECB, says NAB’s David de Garis, but a big reaction in currencies and Treasurys to the latest US GDP numbers. With a lot of European data today and early next week, things could stay quite ‘whippy’.
The US FOMC hiked rates by 25bps to 5.25-5.50% as universally expected.
AUD approaches 0.68, buoyed by China stimulus news and RMB gains
Weak European PMIs have seen yields fall, though moves in US Treasuries retraced latter in the day.
US yields higher with Jobless Claims lower than expected
Central bankers globally seem to have switched to a more measured tone recently. Overnight tapas
Underwhelming China economic data has weighed on sentiment, mostly in Asia and Europe with a decline in CNY also spilling over to NZD and AUD. Core global yields are a tad lower while US equities have resumed their upward trajectory.
A bear flattening of the UST curve post a better than expected University of Michigan survey so the S&P 500 closed marginal lower while the USD found some support.
After the softer US CPI print on Wednesday the cooling US economy narrative was further supported overnight by a softer than expected US PPI print. Megacaps have led gains in US equities while front end bonds have led a decline in UST yields. The USD is broadly weaker with several FX pairs breaking through key support/resistant levels.
Yields tumbled and risk assets soared as US CPI came in much softer than expected
Ahead of the all-important US CPI release tonight, US equities edged higher again overnight while the UST curve flattened driven by an uptick in front end yields. The USD is broadly weaker, but the AUD has been unable to perform.
Payrolls failed to deliver the upside surprise feared following strong data earlier in the week, seeing some pullback in the USD and short-end yields on Friday.
The RBA met yesterday and held rates steady. Other than that, it was a very quiet 24 hours characterised by thin trading alongside the US 4 July holiday.
A quiet night overnight given shortened pre-holiday trade in the US ahead of Independence Day today.
Friday capped a risk positive end to the week and the month of June with softer US economic data releases treated as good news. Weaker US consumer spending and inflation boosted US equities with gains over 1%, US Treasury yields traded lower after the data release and the USD closed the week broadly weaker.
The string of positive US data surprises continued overnight with a big drop in Jobless claims and a decent upward revision to Q1 GDP. US Treasuries led a jump in core global bond yields and US equities closed in the green, unperturbed by the move up in yields. Positive US data surprises help the USD reverse earlier losses, but the AUD/USD held its ground aided by yesterday’s stronger than expected retail sales figures.
Fed, ECB, BoE heads reiterate hawkish views; BoJ reiterates dovish stance
Better than expected US data releases and hawkish ECB talk are two main macro themes from the price actions overnight. US equities embraced the positive vibes from Asia and then better than expected US data releases provided an additional tail wind. In contrast, European equities were little changed with hawkish ECB talk dampening the mood. The belly of the curve led a rise in UST yields while the USD lost a bit of ground.
This week we examine some possible budget assumptions for Australian growth, inflation, wages, interest rates and the $A for 2023-24 as well as the context, thinking behind and risks to the forecasts
Quiet start to week with no market fall-out from weekend Russia news. Weaker Yuan a focus.
PMIs on Friday showed Eurozone output growth close to stalling, seeing Europe lead yields lower and the euro fall.
The BoE surprises market with 50bps, Norges Bank less so with its 50bps. SNB opts for a ‘hawkish' 25bps
Powell added little new information in House testimony, but the US dollar was weaker and equities were lower. UK CPI data surprised higher ahead of the BoE later today
The NAB Rural Commodities Index has continued to fall over autumn and into winter, largely reflecting steep declines in cattle and lamb prices.
Soft risk sentiment overall last night which was mostly China driven.
European equity markets have started the new week on the back foot following a negative lead from Asia. Investors are seemingly disappointed by the lack of new news on China’s stimulus, US equities are closed for a holiday with futures contracts pointing to small dips for the S&P 500 and NASDAQ 100.
AUD ends a big if short local week at the top of the G10 currency pile, AUD/USD +2% w/w
US equities have pushed on yet again, shrugging off a string of soft US data releases. The ECB hiked its deposit rate as expected, lifted its inflation forecast and delivered a hawkish guidance. Core European yields climb on the back ECB news with the euro gaining over 1% while soft US data triggers a decline in UST yields with the USD weaker across the board.
Fed pauses as expected but ‘dot plot’ adds two, not one, more rate rises to 2023
US CPI was in line with expectations, adding to confidence the FOMC will skip at tomorrow’s meeting even as yields pushed higher. Strong UK labour market saw UK yields surge.
After closing modestly higher on Friday, US equities have started the new week with modest gains, led by big tech. 10y UK Gilts, up 10bps to 4.33%, are the notable movers within core global bond yields on the back of hawkish BoE talk. The USD is a tad higher with AUD retaining its upward trend that has been in place since the start of the month. Oil prices tumble on supply-demand dynamics and another downgrade by GS.
Jump in US jobless claims supports lowers US yields and US$; S&P500 back in bull market
The BoC shocked markets overnight, hiking by 25bps to 4.75%.
A soft start to 2023
It has been a quiet 24 hours in markets with generally small market movements, while the Australian dollar held onto its gains following yesterday RBA rate hike, 0.8% higher against the US dollar.
Markets go into today’s RBA decision ascribing a roughly 65% chance to a pause
A combination of a US debt ceiling resolution alongside a mixed US jobs report, still favouring a June Fed pause, and news that China may be considering further support to its beleaguered property sector boosted risk sentiment (VIX sub-15), major equity indices closed the week with solid gain.
A slow start for growth in 2023
A positive night for risk sentiment with equities up (S&P500 +1.0%; Eurostoxx50 +0.9%), USD down (DXY -0.7%), and yields lower (US 10yr -3.8bps to 3.60% and 2yr -6.4bps to 4.34%).
The AUD had fallen to a new post November 2022 following more disappointing China data
After enjoying a long weekend, the US is back with mixed signals coming from equities and bond markets. US Treasuries have led a move lower in core global bond yields while the S&P 500 is unchanged. Oil prices fall over 4% with OPEC + meeting looming large, the USD is little changed, but AUD and NZD struggle, not helped by Yuan weakness.
Public Holidays in the US, UK and Germany made for a very quiet night as far as market moves are concerned.
US equities were higher on Friday as hopes grew of a debt ceiling deal, ahead of news on the weekend that an agreement in principle had indeed been found. US data was strong and Fed tightening expectations firmed.
The US dollar extended its positive streak and yields globally were higher despite mixed economic data as AI-related tech saw US equites higher
Still no sign of breakthrough on US debt ceiling talks, souring risk sentiment.
The absence of a debt ceiling deal weighs on risk sentiment even as Biden calls talks ‘productive,’ while global PMIs reaffirm the stark divergence between services and goods.
A quiet start to the week with little in the way of significant market moves.
US equities struggled for direction on Friday, ending the day marginally lower. After a choppy session, UST yields closed higher across the curve with the USD broadly weaker, ending a three-day winning streak. Debt impasse did not helping sentiment while Fed Chair Powell expressed a bias for pausing rate hikes in June.
Hopes for a deal on the debt ceiling improved.
A quiet start to the week with little in the way of new news or top-tier data.
Markets were spoked on Friday by an unexpected rise in US consumer inafltion expectations
Latest US yield curve movements are giving an even stronger signal of imminent US recession
US yields were lower and the dollar stronger with the FOMC increasing rates by 25bp as expected and dropping the expectation for further hikes.
Big moves in markets overnight as US regional bank worries reignited, signs of catering in European loan demand, and a sharp fall in US job openings.
US yields are higher and the dollar stronger with little fallout from the failure of First Republic, being acquired by JP Morgan in an FDIC-supported deal.
The last trading day of April had a lot to digest with BoJ policy decision alongside market moving data both in Europe and the US. Equities ended the month on a positive move, core yields drifted lower amid growth concerns while the USD was little changed. JPY was the big underperformer and AUD starts the new week at 0.6601.
Softer US growth but stubbornly sticky prices has seen US yields higher, while US equities recorded their biggest gain since January.
The US share market is split between tech majors, doing well on the back of strong earnings versus Financials (and the rest) which are buffeted by banking uncertainty and recession fears. Core global yields are higher and the USD is weaker largely reflecting EU FX outperformance while the AUD has led a commodity linked FX decline.
Us equities haven fallen sharply, bond yields are lower and AUD/USD is back near 0.66, ahead of CPI this morning.
A quiet end to a choppy week, with some intra-day volatility following stronger than expected PMIs.
Weaker second-tier US data has helped push global yields lower, while disappointing earnings by Tesla (-9.7%) and talk of margin compression dragged down equities.
The RBA ‘Fit for the future’ review out this morning, with media saying Treasurer Chalmers accepts all 51 recommendations
A quiet overnight session despite the plethora of earnings reports.
The uplift in US bond yields continued overnight, supporting the US dollar but not hurting equities
Stronger than expected US data pushed US yields higher and supported a broadly stronger US dollar on Friday.
Todays podcast Soft US PPI helps drive a risk-on rally Adds to views the US Fed is almost done USD falls, and AUD and NZD outperform Yields mixed, equities up ahead of earnings Coming up: US Retail Sales, US Bank Earnings “Love is in the air, everywhere I look around; Love is in the air, […]
US treasuries retraced most of their post-CPI rally overnight with core CPI coming in as expected.
It was a quiet session overnight ahead of key risk events later in the week (US CPI is on Wednesday and bank earnings are on Friday, including Wells Fargo, Citigroup and JP Morgan).
A softer than expected JOLT report shook the market overnight, triggering a bull steeping in the UST. The USD fell with JPY along with European currencies outperforming. Commodity linked currencies lagged the move with AUD the notable underperformer, following yesterday’s RBA decision to pause it tightening cycle. US equities ended a four day rally with pro-cyclical sectors underperforming.
Weak US Manufacturing survey data overnight reversed the impact of higher oil prices, leaving bond yields lower and the AUD higher. It’s all about the RBA today
A softer than expected US Core PCE Deflator (0.3% m/m vs. 0.4% expected) helped push yields lower on Friday (US 10yr -8.1bps to 3.47%).
It’s a third successive day of relative calm across markets, though an upside surprise to German CPI has seen European yields push higher.
The positive vibes evident during our trading session yesterday have extended overnight with European and US equity indices higher on the day. Movements in rates and FX markets have been more subdued. The USD is a tad stronger in index terms with JPY the notable underperformer. AUD and NZD are also lower with the former not helped by a yesterday’s softer than expected monthly CPI print.
There has been little top-level news flow over the past 24 hours, which has seen markets relatively calm by the standards of recent weeks.
Bond yields are sharply higher overnight, improved sentiment towards the banking sector one key driver
After steep falls in late 2022 and early 2023, Australian agricultural commodity prices were more stable last month.
Deutsche Bank woes weighted on European equities and on US equities at the open, but the latter enjoyed a decent rebound before the close. Core global yields ended Friday lower across the board , the USD was broadly stronger , but still fell for a third consecutive week, AUD and NZD were the week’s underperformers.
After a positive start, US equities struggled for direction amid lingering banking stability concerns. Front end tenors have led a decline in UST yields with similar price action seen in European curves. BoE, SNB and Norges Bank deliver on expected rate hikes. AUD gives back earlier gains as equities struggle.
The FOMC hiked rates by 25bps to 4.75-5.00%, continued QT, and kept the existing dot plot which pencils in one further hike to 5.00-5.25%. Market reaction was dovish, but was not risk on.
Todays podcast VIX tumbles as investors see the glass half full ahead of FOMC early tomorrow morning Banks lead gains in Equities with HG bond issuance also signalling improvement in risk appetite UST and Bund curves bear flatten as market increases Fed and ECB rate hikes expectations 2y UST jump 20bps, 10y UST gain […]
It was another fairly volatile day following the weekend deal for UBS to buy Credit Suisse, though overall the deal seems to have found some cautious acceptance.
A deal was struck over the weekend that sees UBS buying Credit Suisse for CHF3.0bn, a fraction of its value at Friday’s close. Iitial market response, in FX at least, has been (cautiously) favourable.
The ECB delivered on its 50bps rate promise but scraps forward guidance. Meanwhile the US’ First Republic Bank gets a $30bn deposit injection from other banks
Banking sector turmoil is back to the fore driving all markets, today centred on Credit Suisse.
Bond yields rose sharply on the developing assessment of turmoil in US banking, helped by but largely overshadowing a stubbornly strong US CPI.
Reassurances from US authorities not enough yet to appease markets. Bank stocks remain under pressure with bond yields diving as the path of future Fed hikes comes into question. The USD is also weaker across the board.
The collapse of SVB, the 16th largest bank in the US with $209bn in assets (as at 31 Dec 2022), shook markets on Thursday and Friday. That
Jump in US jobless claims provides hope US labour market may be cooling while Challenger layoff data suggests there is more weakness ahead Softer US data triggers rally in UST and weakens the USD. AUD struggles to perform as US equities tumble with bank stocks leading the decline.
Markets broadly held onto Tuesday’s wild moves, which were driven by US Fed Chair Powell’s Senate Testimony. Overnight Powell spoke again to the House.
The market was not prepared for Powell’s hawkish remarks, sending short rates and the USD higher and equities lower.
Hawkish comments from ECB’s Holzmann send European yields higher in an otherwise quiet night for news flow
The US dollar and Treasury yields both fell back on Friday in what was a good day for equities everywhere – except Australia.
The run of worse than expected (global) inflation-related news continues to ripple through markets, the latest culprits being core Eurozone CPI and revised US Q4 unit labour costs.
The US 10yr finally breached 4.00% for the first time since November, following five days of resistance. A hot German CPI and renewed price pressure in the Manufacturing ISM drove, while risk assets were mixed given the strong China PMIs yesterday
Growth slows as consumption softens
Upside surprises to European inflation out of Spain and France have seen ECB pricing and European yields push higher, with some bleed through into the US. Elsewhere, US equities are little changed, shrugging off soft consumer confidence data, but are and on track for a monthly decline of more than 2%.
A quiet start to the week with no top-tier data. The biggest piece of news was the EU and UK agreeing to a new Northern Ireland trade agreement, now termed the Windsor Agreement.
The US economy has started 2023 from a stronger position that many of us had expected and when looking at the Fed’s new preferred inflation reading that tries to exclude much of the noise in the data, the story doesn’t change.
A solid outcome to round out 2022
US equities stage a late recovery, but remain edgy
In Australia yesterday, WPI wages data showed less wages pressure than feared. WPI grew 0.8% q/q and 3.3% y/y, 0.2ppts below the market consensus and RBA expectations.
The flow of economic data surprises has continued overnight and this time it was a uniformly stronger than expected performance of the services sector across major Developed Market economies.
Australian agricultural commodity prices have continued to fall in the new year.
Since Australia Day the two biggest pieces of news were the BoC explicitly signalling a pause to the hiking cycle on Wednesday after hiking by 25bps, and US Q4 GDP which although beating expectations had a soft underbelly (2.9% annualised vs. 2.6% expected; but private domestic just 0.2%).
European and US PMIs were the main data flow overnight.
Tech stocks lead gains in US equities. NASDAQ up just under 2%.
5% Netflix post-earnings pop helps drive best day for S&P500 in two weeks
USD softer despite ‘risk-off’ market tone.
Very weak US retail and industrial production adds to the tumble in yields
As the market waits for the BoJ policy decision today, the ECB has been the market mover overnight following a Bloomberg source story suggesting the Bank may be turning less hawkish.
US out for MLK day holiday. S&P futures little changed
US equities managed to claw back into the green on Friday to extend the strong start to the year.
US CPI cools as expected, but with even more encouraging details.
Ahead of CPI tonight US Treasuries (and bonds globally) have rallied, 10-year US notes off 5bps (3bps of that seen in the Tokyo session) and 2s down just under 2bps.
Economic news flow overnight has been relatively light, though playing with the grain of the suggestion from last week’s US data (ISM Services) that the US is in process of losing its global growth leadership position.
BoJ stuns markets with a 0% YCC tolerance band widening…
The BoJ thus takes out our award for the most unpredictable central bank of 2022.
Equity sentiment has not been helped by a decent sell-off in core global bonds.
Recession risks were highlighted on Friday with the US S&P Global Services PMI again in contractionary territory.
Australian agricultural commodity prices retreated on average last month, with the NAB Rural Commodities Index down 2.6% m/m in November.
Hawkish ECB rhetoric post 50bps rate rise spooks risk markets
Early this morning and in line with market expectations the Fed lifted the funds rate by 0.5% to a range between 4.25% and 4.5%, a rates level not seen since 2007. The 50bps increase was a downshift following four consecutive hikes of 75bps.
CPI comes in cool at 0.1% m/m and 7.1% y/y, two tenths below consensus
A distinctly cautious air prevails in front of tonight’s all-important US CPI release and tomorrow’s FOMC.
Solid US PPI cements apprehension ahead of the US CPI & FOMC
It was a quiet night for markets devoid of any top-tier data or news flow ahead of key risk events next week (of US CPI, FOMC, ECB).
The Bank of Canada rose 50bps, the sixth consecutive increase, and took the target rate to 4.25%.
Post-COVID normalisation continues.
The RBA increased interest rates by 25bp to 3.1% and continues to guide that “the Board expects to increase interest rates further over the period ahead".
WSJ’s Fed Whisperer Nick Timiraos wrote overnight if CPI on Tuesday comes in hot then the Fed could consider another 50bp increase in February.
The dollar was softer and US yields lower over the past week as markets both pared terminal rate pricing and priced in more cuts from mid 2023.
Slowing growth as consumption, trade normalise
Markets hold, and more importantly extend yesterday’s post-Powell moves.
Markets were relatively muted ahead of Powell’s remarks with US yields and the Dollar were tracking a little higher and equities a little weaker.
China vaccination push sees Hang Seng gains extended to 5%+ by the close
In a quitter session, relative to recent times, the risk positive vibes have extended into a third consecutive day with higher global equity markets, lower global rates and a weaker USD.
The single biggest piece of market-moving economic news overnight has come via the US S&P Global PMIs, which slumped to 47.6 from 50.4, well below the 50.0 consensus.
NAB’s 2022 Renewables Survey signals a further acceleration of Australia’s transition to renewable energy and net zero carbon emissions policies, a trend we expect to see globally into 2030.
US equity investors are certainly looking at the glass half full ahead of Thanksgiving tomorrow with all major equity indices showing decent gains on the day.
Oil market volatility is showing no signs of let-up , Brent crude down to a low of $83 overnight on a Wall Street Journal report suggesting Saudi Arabia was contemplating a 500,000 barrels per day production increase from December.
Latest Fed speak from Boston Fed President Collins, suggests 75bps is still in play for December, noting markets price around 52bps for the December meeting.
US yields are higher and the dollar stronger in a modest and reversal of some of last week’s post CPI moves as Fed speakers remain stubborn that rates will continue to go higher to get to a level that is sufficiently restrictive.
Fed speakers were clear that a pause is not imminent and there is more to do, even as they may move at a slower pace, while stronger US retail sales numbers showed resilience in spending, providing some small counter to the burst of optimism after softer-than-expected US inflation data last week.
It has been a wild night in markets. After initially enjoying a broad and solid risk on move with equity markets rising and core global bond yields falling alongside a broadly weaker USD
The new week has begun with a small reversal in the some of the risk positive moves recorded last week, particularly in FX markets and US Treasuries while equity market are showing resilience.
US CPI, US political gridlock (maybe) and China covid policy tweaks...
It has been a super risk positive night courtesy of a big downward surprise in the US CPI release.
Republican ‘red wave’ failed to materialise, but still expect slim House majority
The NAB Business Survey showed Conditions falling just one point to +22 to remain at very elevated levels, above the pre-pandemic highs for the series.
Speculation about China reopening continues to add some market volatility with WSJ reporting Chinese leaders were considering reopening steps getting some notice.
Risk appetite soared on Friday as Chinese whispers swept markets last week that China had put together a ‘conditional re-opening plan’, reportedly mapping out a material re-opening by March 2023.
Wednesday’s FOMC meeting continues to reverberate through markets.
FOMC Statement hints at reduced pace of tightening ahead…
It has been a volatile session in markets with risk assets initially lifted by rumours China was looking at phasing out its zero-covid policy, only for Beijing to later deny the speculation.
NAB has pencilled in a 25bp hike, we also think there is a real risk that the RBA hikes by 50bps, and that this risk is higher than the 22% chance that markets are currently pricing.
Big gains in US equities on Friday help extend rally for a second week
The ECB meeting was the big event for markets last night and as expected the Bank delivered a 75bps hike, but it sounded less committal on future rate hikes.
Yields are generally lower globally as the earlier run up in expectations for central bank tightening are pared a little further. A hike of ‘only’ 50bp from the BoC helping that sentiment.
Last night’s first Federal Budget under Labor Treasurer Jim Chalmers contained no fireworks, falling fully in line with pre-Budget media briefings.
The UK has a new PM in Rishi Sunak, and gilts have rallied in response. UK 10yr gilt yields were 31bp lower at 3.75%. That’s 90bp off their peak of 4.64%, but still about 60bp above their level before the Truss Premiership.
This week we provide a further update on supply chain disruptions and highlight a few areas where businesses might reasonably expect some lower prices from suppliers in coming months.
Friday’s offshore markets produced as many fireworks as we have seen on just about any day this year with the mere suggestion of the Fed stepping down from 75bps to a 50bps incremental rate hike in December producing a fierce rally in US equities.
Terminal Fed Funds pricing have lifted to 5.00% by March 2023 from 4.92% last week and continue to price a 75bp hike at the upcoming November FOMC meeting and a 75% chance of a follow up 75bp at the December meeting.
Yields rose to fresh cycle highs and risk appetite soured. US equities were lower, halting a 2-day rally despite relatively upbeat earnings from the likes of Netflix and United Airlines.
The selloff in bonds has seen a ‘reversal of the reversal’.
Another big UK fiscal U-turn and positive earnings from BofA boosted global risk appetite last night.
Rise in 1y ahead US inflation expectations spooks markets
Volatile overnight session sees risk on, risk off then risk on again
UK markets remain at the epicentre of global market volatility
Bailey in Washington says bond purchases will end as scheduled on Friday
Risk aversion has dominated the start of the new week amid heighted geopolitical tensions and a market disillusioned by credible BoE support for the Gilts market.
It was ‘good news is bad news’ for US Payrolls which were a touch better than expected and seen as too solid to support a pivot narrative.
In Australia there are two macro developments worth watching, Seek new job ads and Consumption imports in the August trade balance.
Another volatile session in markets; US equities opened lower, not helped by anticipated news of a bigger oil cut supply agreement by OPEC +.
Yesterday 25bps RBA cash rate rise, defied the broad consensus among economists and investors (~45bps was priced in for the meeting) but which was justified by the Board in part on the premise that “the cash rate has been increased substantially in a short period of time”.
A surprise U-turn by the UK government on the fiscal package and a weaker than expected US ISM Manufacturing (50.9 vs. 52.0 expected) have driven a large fall in global yields.
US equites fall on Friday to close out a 3rd consecutive negative quarter
In a positive development the OBR will provide preliminary costings of the UK’s fiscal package on 7 October, instead of the previously signalled deadline of November 23 (the same day as the Budget).
Bank of England has pledged to buy up to £5bn of longer dated gilts each day for up to 13 days (£65bn total) with a motive of protecting the