Twenty four hours
Greek inspired wobbles in Europe and the US and falling bond markets provide a sour backdrop to a very busy trading session for Australian investors. A federal budget, key industrial and retail data from China today and GDP growth numbers for most of Europe tonight mean sentiment could swing several times in this twenty four hour period.
Like a car smash in slow motion, global bond markets are making the adjustment to a post QE world. Bond yields are at three month highs, and seem set to rise further despite remarks from Fed officials that the pace of tightening may be slow. The exception is Greece, where ten year bonds yields sit in the middle of the three month range at 10.6%. This risk premium to other bonds reflects market concerns amid reports the IMF is now lining up with Greece to demand investors take a haircut on existing debt.
Most budget measures were leaked before last night’s official announcement, meaning there are few surprises for investors. The positive of a balance between near term stimulus and long term deficit repair may be outweighed that some aspects of the initiatives may be obstructed in the Senate.
Rallies in metals and energy could see further support for resource shares ahead of an industrial production read in China. A growth rate of 6.0% pa is forecast for April. A reading away from this level will likely spark a positive market reaction. An undershoot could spark talk of further stimulus, while a higher read point to effective stimulus already enacted.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.
Frequently Asked Questions about this Article…
Global bond markets are adjusting to a post-quantitative easing world, with bond yields reaching three-month highs. This creates a challenging environment for Australian investors as rising yields can impact investment returns and market sentiment.
The federal budget, which was mostly leaked before the official announcement, aims to balance near-term stimulus with long-term deficit repair. However, some initiatives may face obstruction in the Senate, potentially affecting investor confidence and market stability.
Greece's ten-year bond yields are at 10.6%, reflecting a risk premium due to market concerns. Reports suggest the IMF is demanding investors take a haircut on existing debt, which could influence global market sentiment and investor decisions.
China's industrial production data, with a forecasted growth rate of 6.0% pa for April, could significantly impact the market. A deviation from this forecast might lead to discussions of further stimulus or indicate effective measures already in place, affecting resource shares and investor sentiment.
Rallies in metals and energy sectors could provide support for resource shares, especially with upcoming industrial production data from China. Positive movements in these sectors can boost investor confidence and market performance.
The IMF's alignment with Greece in demanding a haircut on existing debt highlights ongoing financial instability, which can create uncertainty in global markets and influence investor strategies.
Europe's GDP growth numbers, expected tonight, could lead to multiple sentiment swings. Positive growth may boost investor confidence, while disappointing figures could raise concerns about economic stability and influence investment decisions.
Investors seeking further commentary from Michael McCarthy at CMC Markets can reach him at 02 8221 2135 for more detailed insights into the current market conditions.
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