Originally published by Rivkin Securities
US stocks fell overnight with the Dow Jones falling 0.8% which ends an eight-day rally for the index. Intel (NASDAQ:INTC) was one of the worst Dow performers, falling 1.8%. ASX 200 futures are down 7 points this morning indicating a lower open.
US bond yields surged which has pushed the 10-year yield up to a seven-year high, currently at 3.07%. This is a 25-basis point move in the last month and pushes the spread between Australian and US 10-year yields out to 20 basis points. According to the CME Fedwatch Tool, financial markets have priced in a 25-basis point rate hike in June as a certainty with a 5% possibility of a 50-basis point hike. This will continue to put pressure on the Australian dollar, which is currently trading at US$0.7468.
The US dollar index continued its upward climb, rising another 0.66% to 93.28 which put significant pressure on the gold price. Gold fell US$23 per ounce in response to the stronger dollar and higher bond yields which brought the price below US$1,300 per ounce for the first time in 2018.
The Atlanta Fed is currently predicting a second quarter GDP growth rate of 4.1% for the US. If realised, this would represent one of the strongest quarters in the last ten years and would certainly confirm to the Federal Reserve that the economic recovery is on track.
Data Releases:
- Australia Wage Price Index 11:30am AEST