Stocks Drop as Yields Rally – Dow Down 1%
US stocks took a hit yesterday as another disappointing bond auction pushed yields higher and Fed rate cut expectations out. The Dow once again suffered the most, losing 1.06% on the day, with the S&P and Nasdaq also taking significant hits, closing down 0.74% and 0.58% respectively. Yields jumped up to multi-week highs, the 2-year still trading just under the key 5% level, closing at 4.976% after adding 2 basis points on the day whilst the 10-year gained 7.2 basis points to trade up to 4.613%. Oil prices came off recent highs, with Brent down 0.7% to $83.60 and WTI dropping 0.8% to $79.23 a barrel. Gold also took a dip on the back of the stronger dollar, losing 0.8% on the day to close the NY session at $2,342 per ounce.
Aussie Pairs in Focus for FX Players
Australian dollar currency pairs are coming into focus for longer term FX players after another strong inflation data print yesterday. Those looking for interest rate differential trades which tend to work over longer-term setups are looking at the Aussie, with little chance that the RBA will look to cut rates in 2024 now. With other central banks firmly in the easing camp and some commentators even calling for rate hikes in Australia traders will look to put some trades on especially over the next couple of weeks if we get confirmation from other jurisdictions. Many favour taking the dollar out of the equation due to the harder volatility involved in that trade with EurAud and GbpAud trading near good entry levels on the longer-term charts looking particularly appealing.
Another Tough Day Ahead for Investors
Asian markets are set to start the day on the back foot after higher yields led to a tough day on Wall Street. There is little in the way of tier 1 data due out in the first session of the day and traders will therefore be expecting relatively smooth conditions. We do hear from the SNB’s Thomas Jordan as he continues his Far East tour, this time speaking in Seoul and the European session has an initial Swiss theme as well with the release of the latest Swiss GDP numbers early in the day alongside Spanish inflation data. The New York session is set to be busier as we have 3 major US data prints due out, the Prelim Quarterly GDP data is released alongside the weekly unemployment claims numbers early in the day before the Pending Home Sales update a couple of hours later. Oil traders will also take note of US Crude Oil Inventories that are scheduled later in the day.
