As the North American session began, the Swiss Franc (and the Australian Dollar) were the strongest and the British Pound the weakest. The US Dollar was also weaker at the start of the US session. Yields fell on the day (but are still near their highs for the day) which helped the negative bias. The US Treasury will complete its coupon auctions today with the sale of 30-year notes. Yesterday, I gave the 10-year auction a great D-. I think Rick Santelli gave it a D+ or C-. It wasn’t. The tail was 3bps above. The bid to cover was above average. Domestic and international buyers were below average. It was below average and close to failure. Will buyers come out for the longer issue? Tune in at 1pm EST. Note: The auction helped put a lid on yesterday’s stock market. Major indices closed near their lows for the day today.
Reserve Bank of Australia Governor Michelle Bullock last night reiterated the RBA’s vigilance over inflation risks, indicating that they would not hesitate to raise interest rates if necessary. She said current interest rates remain in line with the RBA’s inflation mandate. However, she does not expect inflation to return to the 2-3% target range until the end of 2025. Bullock also highlighted the economic benefits of investing in renewable energy, which is crucial to mitigating the risks of climate change. She noted that increased weather volatility and higher temperatures pose significant challenges for farmers. While interest rates are not expected to fall quickly, Bullock balanced her comments by saying that the RBA would consider cutting rates if the economy deteriorated more quickly than expected. However, following the RBA’s interest rate decision this week, the market is taking the comments as more hawkish.
Looking at the hourly chart of AUDUSD below, the price bounced off the 100-hour moving average at the session lows and is back up towards yesterday’s high and 50% of the move down from the July high at 0.65733. There is also overhead resistance defined by the 100- and 200-day moving averages between 0.6592 and 0.6600.
Yesterday, I made a special video where I talked about the 100/200 hour moving averages and why they are important. You can watch it by clicking on the video below. Take a look and learn.
Today, stocks started the day mixed in pre-market trading. The S&P and Nasdaq were flat in both up and down trades. The Dow Jones remained lower.
US initial jobless claims will be in focus with forecasts at 240K vs 249K last week. Continuing claims are forecast at 1.870M vs 1.877M last week. The Fed said it is more balanced with its mandate as inflation risks have declined while inflation risks have increased.
Wholesale inventories for June will also be released, rising 0.2% versus 0.6% last month. Wholesale sales are expected to rise 0.3% versus 0.4%.
Richmond Fed President Barkin is expected to speak at 3 p.m. ET. After Friday’s U.S. jobs report, Barkin told the New York Times:
“The most significant cuts are usually associated with an economy that seems to be deteriorating rapidly. Again, 114,000 jobs, while not as good as we were, is, in the long run, a reasonable number.”
A quick snapshot of other markets as the North American session begins:
- Crude oil price rose $0.10 to $75.31. At this time yesterday, the price was at $74.84.
- Gold rose $25.03, or 1.05%, to $2,408.50. At this time yesterday, the price was trading at $2,402.
- Silver is trading up $0.38 or 1.43% at $26.96. At this time yesterday, the price is trading at $27.11.
- Bitcoin is trading at $57,533. At this time yesterday, the price was trading at $56,929.
- Ethereum is trading at $2449.90. At this time yesterday, the price was trading at $2469.70.
In the pre-market period, the picture for major indicators was mixed/slightly changed.
- Dow Jones Industrial Average futures are pointing to a -70 point loss. Yesterday, the Dow Jones Industrial Average fell -234.21 points, or -0.60%, to 38,763.46
- S&P 500 futures are pointing to a 1.25 point gain. Yesterday, the S&P 500 was down -40.53 points, or -0.77%, at 5199.51.
- Nasdaq futures show the Nasdaq down -0.37 points. Yesterday the index was down -171.05 points or -1.05% at 16,195.81
The Russell 2000 small-cap index was down -29.19 points, or -1.41%, at 2035.10.
European stock indices trade lower:
- German DAX, -0.63%
- French CAC index -1.10%
- UK FTSE 100 Index, -1.2%
- Spanish IBEX, -0.78%
- Italy’s FTSE MIB, down -1.15% (10 min delayed).
Stocks in Asia-Pacific markets closed mixed:
- Japan’s Nikkei 225, -0.74%
- China’s Shanghai Composite Index, unchanged
- Hong Kong’s Hang Seng Index, +0.08%
- Australia’s S&P/ASX, -0.23%
Looking at the US debt market, yields are trending lower:
- The yield on the 2-year note is 3.959%, -4.2 basis points. At this time yesterday, the yield was at 4.005%.
- The yield on the 5-year Treasury note was 3.746%, -4.9 basis points at this time yesterday, and was at 3.767%.
- The yield on the 10-year note is 3.925%, -4.1 basis points. At this time Friday, the yield was at 3.931%.
- The yield on the 30-year Treasury note is 4.233%, -2.7 basis points. At this time Friday, the yield was at 4.227%.
Looking at the Treasury yield curve, the spreads are widening with the 2-10 year Treasury yield spread only negative by about -7.1 basis points.
- The spread between the 2-10 year bond yield was -3.2 basis points. At this time yesterday, the spread between the 2-10 year bond yield was -7.1 basis points.
- The spread between the 2-30 year bond yield was +22.5 basis points. At this time yesterday, the spread was +22.5 basis points.
In the European debt market, benchmark 10-year yields are heading higher: