Originally published by Rivkin Securities
US stocks rebounded sharply overnight with the S&P 500 climbing 2.7% and the Dow Jones Industrial Average 2.8%. This was a 669 point move for the Dow, which represents the third largest point increase in its history. The rebound came as fears of a trade war between the United States and China subsided. S&P/ASX 200 futures are 33 points higher this morning although the local market is likely to underperform the US market since it outperformed during the decline.
Despite the large rally in stocks, bond yields failed to make significant gains with the 10-year currently sitting at 2.85%, right in the middle of its recent trading range. Short term rates continue to rise with the Libor-OIS spread now up to 59 basis points. This has brought the Australian 3-month Bank Bill Swap Rate up to 2.0%.
The US Dollar Index fell as stocks rallied and only just managed to hold onto the 89 handle. The fall in the dollar provided support for precious metals as the gold price broke through $1,350 per ounce. It also sent the Australian dollar higher, currently trading at US$0.775.
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