US Markets Rally Again – Nasdaq up 1.2%
US Stock markets rallied for the third successive session yesterday as traders continued to embrace a more dovish Fed. Comments from FOMC members Barkin and Williams backed up the message from last week’s meeting and investors piled into Stocks again. The Dow gained 0.46% on the day whilst the more tech-heavy S&P rose 1.03% and 1.19% respectively to notch up the best 3-day run for indices since November. Other markets were more subdued, US treasury yields finished close to flat, the 2-year gaining 2 basis points to trade back at 4.826% and the 10-year losing 1.1 basis points to 4.489% with the dollar index edging just 0.1% lower on the day, despite a decent rally against the beleaguered Yen. Oil rallied on news that a Gaza cease-fire is still in the balance, Brent up 0.66% to $83.51 a barrel and WTI rising 0.73% to $78.68, and Gold jumped 1.08% to trade back at $2,333 by the close.
Central Banks in Focus this Week
On what is a relatively quiet calendar week, two major central bank announcements are standing out as key events. The Reserve Bank of Australia and the Bank of England are both on deck this week with the RBA due to update the market on its rate today. This could be the event of the week for investors looking for a surprise and Aussie dollar traders are fully expecting to see volatility around the event. Sticky inflation and a strong jobs market could lead the bank to push rates higher before lower and some are even talking about the outside risk of a hike today which could lead to strong moves higher for yields and the Aud – most expect the bank to hold with maybe a slightly more hawkish message from the statement and press conference. The Bank of England is in a slightly different position but is also expected to keep rates on hold and whilst this is unlikely to be popular with the majority of households, pay growth and services inflation data remain high and have the MPC’s hands tied to a certain extent.
Busier Day Ahead for Markets
Asian markets are set to open on the front foot again today after another strong day on Wall Street. However, investor focus will soon move to Australia and the latest rate update from the Reserve Bank of Australia. The expectation is for another hold, but traders are expecting volatility around the statement and press conference as sticky inflation remains an issue. The European session will see the focus on the UK for the first and not the last time this week with the Construction PMI data due out early in the day. The US is relatively quiet in terms of data releases with just the Canadian Ivey PMI data due out, however, investors are hoping for more positive reactions to the recent Fed updates as the session progresses.
