Commodities and bond yields keep investors nervous
The stock market looks set for a nervous open this morning as investors react to lower commodity prices and keep a watching brief on rising bond yields.
The good news is bad news theme returned to international markets in the form of a strong bounce in US housing starts during April. It appears that housing starts have emerged from their winter hibernation and are again trending at above 1 million pa. This makes a welcome relief from the run of generally soft data on the US economy for March and April.
However, the good news on housing starts brings with it the prospect of rising interest rates. US bond yields continued to edge higher and whether or not Australian yields follow suit today is likely to determine whether local bank stocks continue to fall. Both Commonwealth Bank shares and Australian 10 year bonds are close to the potential resistance of their respective 200 day moving averages. A conclusive move above 3% and the 200 day average by the bond yield could well see CBA fail at this resistance, with lower prices in store. On the other hand investors in “yield stocks” are likely to be encouraged if bond yields show signs of respecting resistance around current levels.
Commodities were a casualty of the stronger US Dollar overnight and both the materials and energy sectors are likely to be down in early trading today. This is likely put the ASX 200 index under pressure this morning unless bank stocks can shake off yesterday’s blues and stage a rally.
For further comment from CMC Markets please call 02 8221 2137.
Frequently Asked Questions about this Article…
Investors are feeling nervous due to lower commodity prices and rising bond yields, which are influencing market dynamics and creating uncertainty.
Rising bond yields can lead to higher interest rates, which may negatively impact stock prices, particularly for bank stocks and yield-sensitive investments.
A strong increase in US housing starts signals economic recovery, but it also raises the prospect of rising interest rates, which can affect bond yields and stock prices.
Commodity prices are falling due to a stronger US Dollar, which typically makes commodities more expensive for foreign buyers, reducing demand.
The materials and energy sectors are likely to be affected by falling commodity prices, while bank stocks may be influenced by rising bond yields.
If Australian bond yields rise above their 200-day moving average, it could lead to lower prices for bank stocks like Commonwealth Bank, as they may face resistance at current levels.
The 200-day moving average is a key technical indicator used by investors to assess potential resistance or support levels for stocks and bonds, influencing buying and selling decisions.
Investors can stay informed by monitoring economic indicators, such as housing starts and bond yields, and seeking expert commentary, like that from CMC Markets.
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