News & Analysis

Rate worries trim Dow gains; Oil run continues; USD strength knocks AUD back into 70 handle

Oct 4, 2018 | Market Updates

Upcoming high impact news:

11:30 AUD Trade Balance
23:15 USD FOMC Member Quarles Speaks (Med Impact)

U.S stocks ended higher overnight but the Dow failed to hold its charge as rates fear return. The Dow Jones added 54 points and hit a new all-time high of 26,951.81 before cutting some gains. The Nasdaq added 25.54 helped by Apple climbing 1.2%. The S&P500 added 2.08 pts as losses in consumer and utility stocks outweighed gains in the financial sector.

“Financials are trying to bounce,” said Mark Newton, managing member at Newton Advisors. “This group has been under relentless pressure over the last couple weeks, so it’s tough to make too much of today’s move, but is helping markets to rally a bit more.” Private payrolls increased by 230,000 in September — the most since February — according to a report from ADP and Moody’s Analytics. Economists polled by Refinitiv (formerly Thomson Reuters) expected a gain of 185,000. “Investors were looking for a rebound from last month’s muted results, and they got it,” said Mike Loewengart, vice president of investment strategy at E-Trade. “Economic reports, market movement, and even the Fed are all telling us one thing: The economy is in a solid place right now.”

ISM non-manufacturing index reached its highest level on record, after Wednesday’s data.

T-Notes – the yield on the 30-year Treasury bond hit its highest level since Oct. 3, 2014, and was last seen at 3.309%. The yield on the benchmark 10-year Treasury note also jumped and was at 3.157% at 3:59 p.m. ET, down from 2011 highs hit earlier in the session.

European markets rallied on Wednesday, the DAX remained unchanged due to a German bank holiday. The FTSE gained 35.73. The Italian government is reportedly planning to lower its deficit from 2.2% in 2020, to 2% in 2021, from an expected 2.4% next year.

Oil broke to new weekly highs overnight after a mainly muted session. Commercial crude stored in the United States rose by 8 million barrels in the week through Sept. 28, according to government data. Prices saw support from expectations that U.S. sanctions on Iran will further cut the OPEC country’s oil exports. USOUSD added 114 cents and at one stage hit 76.77 before closing at 76.07.

Gold gave back some gains closing 6 dollars lower as tensions eased in Europe. A stronger USD also cut into demand. The USD gained to risk currencies, the AUD and EUR being the hardest hit both losing over 70 pips. The AUD has now dropped back into the .70 handle. The GBP and EUR cut earlier rallies to close at new weekly lows. The Yen was mixed gaining to the AUD but closing lower to the EUR, GBP and USD. The U/J jumped adding 90 pips hitting new 10-month highs at 114.54.

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Sources; CNBC – All times are AEST

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