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Rate worries hold stocks back – Italy concerns send Europe and Euro lower; China Policy easing pumps up USD, hits Gold

Oct 9, 2018 | Market Updates

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The Dow snapped a 3-day losing streak overnight closing 39.73 points higher after testing lower gains where capped as traders continue to worry about interest rates. TheS&P500 closed just in the negative losing 1.14 pts. The Nasdaq lost 52.50 dragged lower by losses from Amazon,  Netflix and  Apple.

“The rise in interest rates was sparked by signs that the economy is beginning to run hot,” said Bruce Bittles, chief investment strategist at Baird. “Looking forward, profit margins could come under stress due to rising interest rates, rising wages, four-year highs in energy costs and a strong dollar. We recommend investors concentrate on the strongest sectors including healthcare and industrials.” “While the 10-year Treasury yield is rising it is still well below nominal GDP growth,” they said. “In fact, Fed tightening and the rise in the 10-year yield over the past year have been less than the acceleration in economic growth, such that monetary conditions have actually eased.” U.S. Treasury’s did not trade on Monday as the bond market remained closed for Columbus Day. Traders will be looking to tonight’s movements.

The latest corporate earnings season kicks off this week with major banks like Citigroup, J.P. Morgan Chase and Wells Fargo all scheduled to release their latest quarterly results. – CNBC

Europeans shares fell into the red, the banking index was among the worst sectoral performers, finishing down 1.37% amid renewed fears over Italy’s budget plans. The FTSE MIB index dropped 2.43% by the market close, with government bond yields hitting fresh highs during trade. Indexes fell, the DAX dropped 164.74 and the FTSE lost 85.21.

Oil edged lower on Monday but pared losses along with the U.S. stock market as investors bet on China’s economic stimulus steps. Reports that some Iranian oil exports will keep flowing after the U.S. re-imposes sanctions on the country put pressure on crude futures. USOUSD closed 12cents lower after fighting back from a 113 cent decline. Gold dropped $15 after the USD rallied on Chinese policy change. China’s central bank on Sunday announced a steep cut in the level of cash that banks must hold as reserves, marking the fourth such decrease this year. – CNBC

The EUR fell on continuing Italian worries, the EURUSD lost 30 pips, the GBP retreated as traders took profits and moved back into the USD and Yen. The GBPJPY lost 112 pips. The AUD help gains despite a stronger USD and negative influences sending traders back to safe havens. The AUDUSD closed 24 pips higher. The USD dropped to the Yen losing over 50 pips and ha continued lower this morning down a further 24 pips. The USDCAD rallied on dollar strength and weaker oil markets adding 17 pips but ending well off session highs.

Stocks remain under pressure this morning, the ASX200 is 58 pts lower, the Yen is stronger to the majors as demand for risk continues to look weak.

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Sources; CNBC – All times are AEST

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