Originally published by Rivkin Securities
US industrial stocks surged overnight with the Dow Jones climbing 1.6% although the broader stock market, as measured by the S&P 500 index, climbed just 0.8%. The rally came as markets became optimistic about a headline stating that China and the US will engage in trade talks that would hopefully lead to a ratcheting down of the tariffs that each country has been imposing on goods made by the other. The stocks that performed the strongest overnight, therefore, were those most exposed to trade such as Boeing (NYSE:BA) (up 4.3%) and Caterpillar (NYSE:CAT) (up 3.2%).
US bond yields remained low despite the rally in the stock market with the 10-year yield currently at 2.87%. The spread between short term and long-term yields is also back near a 10-year low with the 2s-10s spread currently 25 basis points indicating that the bond market is still sceptical about the medium-long term outlook for the US economy. The Federal Reserve is still set to raise interest rates by another 25 basis points at its next meeting on 26 September.
Australia’s employment data was released yesterday and although the headline number was a disappointing loss of 3,900 jobs, this was made up of a gain of 19,300 full time jobs offset by a loss of 23,200 part time jobs. The unemployment rate declined to 5.3% (from 5.4%) although this was partly due to a fall in the participation rate. Overall the market took the news positively with the Aussie dollar rallying and the stock market recovering early losses.
Data Releases:
- Canada CPI 10:30pm AEST