Originally published by Rivkin Securities
After a horrible week last week US stock markets have started the week with a bang. The Dow Jones Industrial Average was up 1.7% and the S&P 500 1.4%. After a higher open, both indices climbed throughout the session to close not far off the day highs. The question from here is whether this represents the end of the correction and a return to the low volatility regime that we’ve had for the last year or so. With US 10-year bond yields at 2.86%, this still looms as a potential trigger for another correction if it continues to rise. President Trump has announced a large infrastructure package that will further increase the deficit of the government and require increased funding from bond markets. This is likely to keep upward pressure on yields.
The gold price rallied overnight, closing at US$1,322. Gold stocks had a particularly strong session with the HUI index of gold miners rising 3.4%. Gold stocks had been sold off quite aggressively over the last month as the market clearly anticipated falls in the gold price. Now that these falls haven’t occurred, the market is repricing gold stocks back up.
The WTI oil price initially rallied quite strongly, getting above US$60 per barrel before retreating for much of the US trading session. At the close, WTI was just $0.15 above its price 24 hours earlier. The change in inventories this week will be crucial for determining whether further declines in the oil price are on the cards.
iron ore prices are holding onto gains made in late 2017, currently trading around US$75 per tonne. This level is close to the one-year highs and represents a huge increase over the ~US$32 per tonne that prevailed a year ago.
Data Releases:
- UK CPI 8:30pm AEDT