And on a charged day, Trump declared that his biggest threat was the Fed and continued on his rant about how he is disappointed with Powell. Some things never change. It would appear Trump is trying to politicise the Fed and interest rates ahead of the mid-term elections.
Economic data is indicating the economy is growing at a steady pace, and the Labor Department release today said that job openings in August grew to 7.14 mio, the highest on record. Industrial production was up 0.3% and was slightly stronger than expected.
Sentiment ruled the roost in Euroland. Both bunds and stocks rallied and that helped drag CDS and credit spreads tighter on the day. The safe haven effect appears to be holding. German ZEW survey had economic sentiment weak and is now been in negative territory for 7-months.
U.S. Treasuries are sitting tight. Bearish bets have been pared and investors are starting to become comfortable again. At least that’s the perception.
China’s holdings in U.S. Treasuries fell again in August. That’s 3 months in a row. Their holdings have slipped from July where the Government held $1.171 tr to its August holdings of $1.165 tr. Japan also decreased their holdings by $60 bio. China has been using its currency reserves and allowed them to reduce as part of the policy to stabilise the yuan. The yuan is off 5% for the year.
Equities: The S&P rose 2.2% and the Dow rose 2.17%. The Stoxx gained 1.6% while the Vix closed at 17.75 as uncertainty falls.
Currencies: The Bloomberg Dollar Index fell 0.1% and the yen fell 0.4% while the euro rose 0.1%.
Bonds: The ten-year closed around at 3.161%. The 2-year closed at 2.87% and the 30-year closed at 3.331%. The ten-year bund closed at 0.49% and the OAT closed at 0.843%. The U.S. curve closed on the day with the following closes 2/10 at 29 bp, 2/30 at 46 bp and the 10/30 closed at 16.9 bp. The U.S. 5-year closed at 3.024%.
Commodities: WTI rose 0.2% while Gold fell 0.2%.
Bitcoin is trading at around U$6,446.
Aussie Market Today.
Buy equities. What else can you say unless of course, Trump says something that’s detrimental to markets? Sentiment is rebounding and no doubt Asia will take a lead from last night and continue the rally.
Sell bonds. Well, maybe. Risk is back on but with rates at current levels they are starting to attract a little investor interest. Certainly, the selling pressure is lower. Look for a little volatility. If there is a move, I don’t expect that move to be substantial.
The Aussie remains vulnerable as the interest differential between here and the U.S. remains negative and with a drought and a possible slowing of the economy. The AUD looks vulnerable as a trend. An uptick in commodities will help but a strong dollar could slow that move.