Risk off, it seems -- equities on both side of the Atlantic were offered while notes and bonds generally saw a bid.
In Forex there was nada -- nothing -- and volatility remains very low. As for drivers? Well, in equity land, most of it appears to be stock-specific factors. Negative sentiment started creeping in during the European session on a combination of poor earnings reports (Vodafone) and broker downgrades (ThyssenKrupp).
That sentiment extended into the US session with some disappointing earnings reports from retailers such as Staples and Urban Outfitters and industrial stocks like Caterpillar.
Equities ended 0.7 per cent lower on the S&P500 (1872), with the Dow off 137 points (16,374). The Nasdaq then fell 0.7 per cent (4096). By sector, there was red everywhere, although industrials and telecommunications were hardest hit. In Europe, the Dax finished 0.2 per cent lower, the CaC was off 0.4 per cent and the FTSE100 was down 0.6 per cent.
Forex markets saw very light trading again, with the euro only bouncing around on a 25 pips range. At the time of writing the unit was little changed at 1.3702. The British pound was only a little more exciting, pushing 28 pips higher to 1.684. As for the Australian dollar, the modest selling action we saw through most of our session yesterday continued overnight, with another 26 pips lost. As I write, the Australian dollar is at 0.9244, while the Japanese yen is at 101.3.
Rates fell as US Treasuries rallied. The 10-year bond yield fell about 3 bps to 2.511 per cent, the 5-year followed suit, also down 3 bps to be at 1.5114 per cent and the 2-year is 0.343 per cent. Aussie futures in turn pushed higher, the 3s up 3 ticks to 97.20, while the 10s were up 2.5 ticks (96.320).
Commodities didn’t do a great deal and trading was mixed. Precious metals were up, though barely, with gold up smalls (at $1294) and silver 0.2 per cent higher. Copper was off 0.7 per cent, while in the crude space price action was mixed. Brent rose 0.5 per cent ($109.86), while WTI fell 0.2 per cent ($102.4).
Elsewhere, the key dataflow was confined to the UK. Inflation came in stronger-than-expected, rising 0.4 per cent in April to be 1.8 per cent higher annually (from 1.6 per cent year-on-year). In the US, the New York Fed President said that no one knows when the first rate hike will be, but when they do start hiking it will be slow. Philadelphia Fed President Charles Plosser then suggested that the Fed could start hiking sooner than expected given the US economy is the strongest it has been since the recovery began. Finally, Moody’s slapped an upgrade on Ireland, lifting its rating from Baa3 to Baa1.
Markets today. Aussie stocks look set to sell off, with the SPI pointing to a 0.5 per cent fall. In terms of dataflow, consumer confidence sy 10.30am (AEST) and wage prices sy 11.30am (AEST) will be the key releases. Wage prices are contained -- they usually are, and so that release is unlikely to move the market much. As for confidence, early indications are that it will be hit and the budget certainly has done nothing to advance Australia or the prosperity of its people.
Looking abroad, the Bank of England puts out it minutes tonight and we also get UK retail sales. In the US it’s all about the Fed. Prior to the minutes at 4am (AEST) we see speeches from Fed Chair Janet Yellen, the NY Fed President William Dudley, Kansas City Fed President Esther George and the Minneapolis Fed President, Narayana Kocherlakota.
Have a great day.