US Economy showing signs of strength

Deja Vue

And I am not quoting Dianne Warwick or Crosby Stills Nash and Young, I am talking about a market that has all the hallmarks of yep, seen that done that and here we are again. The US economy is finally starting to show some strength however it remains to be seen whether this is an Indian Summer or a real summer.

Equities rallied to new highs and bonds actually had a small rally with the yield curve flattening a little. This rally was a rally of a technical nature with some 15,000, 10 year contracts trading in 5 minutes. Apparently a purchase of futures of the March Ultra Bond Futures Contract led to the rally on the physicals. The yield curve between 5 years and 30 years settled to around 121 points. The UST 10 year fell to 2.37%. The European result to date has had no real material impact on the US Treasuries to date. The ISM Data released today is showing some strength and it is surprising that while equities hit a new high, bonds were relatively stable to close the day at around 2.39.

Fed President William Dudley made some comments today that did nothing to upset the market. Dudley commented that the strength of the US economy was improving and that the Fed would make measured rate hikes in accordance with any improvement in the US economy.

Renzi was defeated on his referendum and this has possible implications for the Italian Banking Sector. There is a suggestion that Monte Dei Paschi could be nationalised.  It is expected that the status quo with the current ruling coalition remains in power and this will be good for bonds and equities in Italy.

Aussie Market Today

The record high that was reached on the major US indices means that today could be a reasonable day for Aussie equities. Bonds could trade a point or two weaker however I expect bonds to be quiet leading into next weeks Fed meeting. Credit should improve on the day. The dollar index was slightly stronger. Industrial commodities were weaker on the day whilst oil and gas were mixed. The December Contract for Iron Ore was slightly stronger in the day and  the strong trend continues.