Originally published by Rivkin Securities
After opening higher, both the Dow Jones Industrial Average and S&P 500 had fairly uneventful trading sessions moving sideways within a fairly narrow range. A string of earnings announcements from some of the largest companies provided catalysts for those stocks with Twitter (NYSE:TWTR) shares climbing 18.5% after their earnings announcement showed smaller than expected losses and that it expects to make a profit in the next quarter. One interesting part of the announcement was that the company admitted it had unintentionally overstated the number of active users in past announcements although monthly active user growth was still up 4% relative to a year ago.
Bond prices fell again overnight with the US 10-Year yield now at 2.46%. having climbed from 2.04% since the beginning of September. The Australian 10-year bond yield has also risen, currently at 2.8% after reaching a year-to-date low of 2.35% in June. The run up in bond yields will eventually place upward pressure on other interest rates in the economy. A rise in interest rates is somewhat of a double-edged sword for Australian banks. On the one hand, higher rates are usually good for banks as their interest margin often increases as rates increase. On the other hand, higher rates in Australia may risk slowing down the property market which the banks have been benefiting from through an increase in the number and value of mortgages.
Oil prices continue to rise, now approaching $53 per barrel for WTI oil which puts it back near the highs from February of this year. The most recent inventory report indicated that although crude stockpiles rose slightly, there were large drawdowns in gasoline and distillates inventories. The current US crude inventory still sits at two-year lows although this is still slightly above the five-year average inventory level. OPEC has hinted at a possible extension to its production cuts however we will likely have to wait until closer to the March 2018 expiry of the current cuts before we get any real action on this.
Tonight the US releases its first estimate of third quarter GDP. According to the Atlanta Fed GDP tracker the latest forecast is a 2.5% growth rate.
Data Releases:
- US 3rd Quarter GDP 11:30pm AEDT