Originally published by CMC Markets
US bond yields rose again last night making it difficult for bargain hunters to unleash their animal spirits on the stock market.
Potential buyers are aware that a recovery rally could easily gain momentum on the back of the relative value created by the sell-off in stocks. However, rising US bond yields were the catalyst for the recent savage sell-off and buyers may be cautious if the bond-selling trend re-establishes.
The US dollar was assisted by news that the US Senate has avoided a government shutdown. However, dollar strength along with rising bond yields may also indicate that markets are continuing to adjust to last week’s news of improving US wage growth.
US shale oil producers have proven good to their word, increasing production to take advantage of the recent rally in the oil price. This may leave the mid-$60 range as a cap on the US oil price at this stage.
The Australian profit season is now underway in earnest with several major companies reporting today. NAB produced a steady quarterly report that included early progress on its productivity investment program but demonstrated that the major banks are finding it difficult to achieve significant underlying revenue growth in the current environment.