Markets Steady After Fed Comments – Dow up 0.4%
US markets experienced a relatively quiet day yesterday as comments from Fed members followed in line with recent advice from the Fed Chair, that the committee is in no hurry to cut rates. The three major indices all closed the day in the black, the Dow led the way finishing up 0.37%, the S&P gained 0.23% and the Nasdaq closed just above flat, up 0.07%. US Treasury yields dropped on the day ahead of a key record $42 billion dollar auction for 10-year bonds, the 2-year lost 6 basis points to trade back to 4.41% and the 10-year lost 7 basis points, back to 4.10%. In line with the treasuries, the dollar dropped against most of the majors with the Dxy losing 0.24% on the day. Oil gained back some ground, Brent rising 0.77% to trade at 79.00 a barrel and WTI gaining 0.73%, back to 73.40 a barrel. Gold pushed back to slightly higher levels in line with the dollar deprecation, trading around the $2,035 per ounce level at the start of the trading day.
RBA Steady but Remains Wary of Inflation
The Reserve Bank of Australia kept rates on hold at 4.35% yesterday as was well expected by the market but then set a hawkish tone by advising that a further rate hike could not be ruled out given that they felt that inflation was too high. They did acknowledge that inflation data shows that it is cooling, but they needed more evidence before even considering a cut which many homeowners are hoping for in the near future. The Aussie dollar rose on the day both as a reaction to the RBA’s stance and to the slightly weaker greenback, but it remains relatively close to recent yearly lows. Traders however were mainly expecting a hawkish bias to the statement and feel that the US dollar side of the equation as well as overall global growth concerns will dominate the medium-term direction of the Aussie and therefore have remained bearish on the whole and will use any rallies to find better levels to sell.
More Action for Financial Markets Today
Traders in APAC have already seen the first surprise of the day today when Kiwi employment data came in much stronger than expected giving the “flightless bird” a bit of shot in the arm in early trading. The employment change increased 0.4% against an expected 0.3% but more crucially the unemployment rate came in at 4% against and expected 4.3%. The calendar is relatively bare for the rest of the session but once Europe opens, investor focus will move to Switzerland and the SNB’s update on its Foreign Currency Reserves. There is little on the data front in the New York session, but Fed speakers are back in action and we hear from both Adriana Kugler and Thomas Barkin before the key 10-year Bond Auction near the end of the day.
