Everything hinges on Powell and what Jerome says later this week. Stocks were higher and investors are lined up as we wait for this week’s central bank gabfest. The S&P 500 jumped towards the close and that rise was attributed to tech stocks and in particular the FAANG shares.
The fall in the Stoxx continues as BASF led the European markets lower. BASF lowered their forecasts blaming global trade issues.
Bonds were relatively quiet on the day. The curve flattened because short term rates rose faster than longer rates as the expectation of a smaller rate cut rises. The probability of a rate cut of 25 bp in July is around 96% whilst the probability for a 50 bp cut is 3.8% down from 30% last week. Powell’s comments Wednesday will set the tone for the coming weeks.
Today saw $38 bio of 3-year notes auctioned. The notes saw tepid demand with the bid to cover ratio at 2.39 the lowest since March 2009. (Reuters) Primary dealers took about a third of the issue.
Shale oil is on track to possibly rising to a record high. Dry freight rates are on the rise as a result of new regulations requiring the use of cleaner fuel. Freighters are being taken off-line for refits.
Equities: The S&P 500 fell 0.43% The Dow fell 0.43%. The Vix closed at 13.96. The Stoxx Europe 600 Index fell 0.9%.
Currencies: The euro fell 0.1%. The Bloomberg Dollar Spot Index gained 0.2% and the yen fell 0.2%.
Bonds: (as at 4.30pm). The ten-year is trading at 2.072%. The 2-year is trading at 1.919% and the 30-year is at 2.545%. The U.S. curve closed on the day with the following closes 2/10 at 15.4 bp, 2/30 at 62.9 bp and the 10/30 closed at 47.3 bp. The U.S. 5-year closed at 1.889%. The 2/5 spread is now -3.2 bp. The ten-year bund closed at -0.353% and the British gilt closed at 0.718%. The 10-year yen gilt is trading -0.14%.
Commodities: WTI was gained 0.6%. Gold rose 0.1%.
Bitcoin is trading around $12,578.
Aussie Market Today.
Equities would appear to be in for a small rally.
Bonds will be bound by offshore movements. The trend appears to be yields drifting higher and that will possibly remain in place until Powell addresses Congress later this week. Credit continues to drift wider and that’s at the expense of bank paper. The announcement by APRA yesterday regarding bank funding has seen bank sub debt widen some 5-7 bp.