Originally published by Rivkin Securities
US stocks closed lower overnight despite opening higher. The session was categorised by a steady decline in both the Dow Jones and S&P 500 indices such that both closed on their lows for the day. Despite these falls, these indices did have a positive month although April’s gains weren’t enough to bring them back to positive for the year to date. McDonald’s (NYSE:MCD) shares were a standout as the company reported better than expected results for the first quarter. MCD shares were up 5.7% last night making it by far the best performer in the Dow Jones.
US bond yields are trading right around multi-year highs although the 10-year bond has so far failed to hold above the 3.0% level. The rise in yields this year has been fairly dramatic although by historical standards, current yields are still low. The yield curve, however, is very flat relative to historical averages with the spread between the 2-year bond and 10-year bond at just 46 basis points. This can suggest the market is worried about future economic growth.
The US dollar index has been climbing over the past two weeks which is putting pressure on the Aussie dollar. The Aussie dollar is currently trading at US$0.753 which is a year-to-date low. With the Reserve Bank of Australia making its interest rate decision today, the board will certainly be factoring in the level of the Aussie dollar. A weaker currency is seen as doing the job of a rate cut and therefore a weaker dollar makes it more likely that the RBA will hike rates at some point this year. Although the board is very unlikely to announce a rate hike at today’s meeting, the statement will be in focus for clues to whether we should expect one this year.
Data Releases:
- Australia RBA Rate Statement 2:30pm AEST