Stocks Fall and Yields Rise on Inflation Concerns
The glass turned half empty for investors in the US yesterday on the first trading day of the week as the major US indices took a fall, and treasury yields moved higher. The Dow dropped 0.56%, the S&P 0.42% with the Nasdaq faring the best of the three, just 0.08% down at the close. The US 10-year yield hit its highest level in over a week, up 9bps to 4.26% with the short-term rate sensitive 2-year rising to 4.97%. The dollar took advantage of haven flows to drive higher further against the majors with the UsdJpy breaking through 147.00, and the Aussie dropping to more fresh yearly lows. Oil powered higher again with WTI hitting a peak at $88/b, and Brent moved above $90/b as the Russians and Saudi’s delivered expected production cut extensions.
Jump on the Sentiment See-Saw
Traders are preparing for some more volatility in the market as we move out of the northern hemisphere summer trading period, and markets look to central banks for their next moves after historic hiking cycles. It was not a seismic change in sentiment yesterday in US markets, but it was a good indication of how fickle the market can be when we are approaching the top of the cycle. We now have both Fed members and data giving us good indicators on both sides of the hike or stick argument, and until we see both pulling in the same direction, then expect markets to swing one way or the other in line with sentiment. It looks set to be an interesting few months into the end of the year and traders are preparing to become a bit more nimble in their positions and views as those aforementioned cycles come to an end at differing rates, and new trends take time to materialize.
Key Events Ahead for Australia and Canada
The focus for traders today will be firmly on the commodity countries and currencies of Australia and Canada as we see key market events for both. The Asian session sees the release of latest GDP data in Australia with the market expecting a quarterly increase of 0.4%, the Aussie dollar is sitting near yearly lows and a lower print could see if it tumbles further. There is little of note for the European session but once the US Day begins we have the US ISM Services PMI data to contend with at the same time as the latest Bank of Canada rate update. Expectations are for the BOC to keep rates on hold at 5%, but expect volatility in the Loony around what is said in the statement as traders look for indications of the bank’s next move.
