Market Headlines
Both US equities and the US dollar fell, with the S&P500 down 1.1% on the day and 4.8% on the month, its worst month since March of this year. That was despite congress passing a stopgap spending bill that will extend Government funding through to December 3. Nancy Pelosi also said that a vote on the $550bn infrastructure bill will take place on Thursday despite Democratic divisions. China’s Central Government ordered SOEs to secure supplies for this winter “at all costs”.
US yields closed the day lower on late buying with the 30yr testing 2.10% before edging back 1.5bps to 2.045bps. US 10yr yields fell 3bps on the day to 1.4873% (-2.9bps), 5yr fell 2.5bps to 96.5bps and 2yr was 1bp lower on the day, at 27.5bps. 10yr Gilt yields closed 3bps firmer at 1.022% and Bunds +1.3bps at -20bps.
Commodities, WTI rebounded from a sharp slide into US trading (hit -2%), firstly on the news that the stop gap bill is now likely to pass today and then on China stating that it is ordering energy firms to secure supplies at all costs. Copper fell 2.4%.
Overnight Currency Range
AUD/USD 0.7175 0.7257
EUR/USD 1.1563 1.1609
GBP/USD 1.3417 1.3516
USD/JPY 111.24 112.08
NZD/USD 0.6860 0.6921
USD/CAD 1.2631 1.2763
USD/CNH 6.446 6.4794
AUD/JPY 80.25 80.91
AUD/NZD 1.0452 1.0485
AUD Thoughts
The AUD/USD traded firmly overnight helped by some end of quarter USD supply. The range was 0.7175/.7257 with offering interest expected to have increased above the high while demand rests in the 0.7130-40 region.
Event Risk Data Today
Australia: The market is forecasting a 1.4% rise in September in the CoreLogic home value index despite ongoing delta lockdowns. For August housing finance, the market is forecasting a decline of 3.0% as lockdowns impede housing turnover.
New Zealand: The September ANZ consumer confidence index should show Covid restrictions weighing on sentiment.
Euro Area: Rising energy and household goods costs are supporting a temporary surge in CPI inflation (market f/c 3.3%yr).
US: Pandemic relief programs have provided an income boost that is now fading, with personal income in August expected to rise a modest 0.2%. A rotation to services should meanwhile be apparent in August personal spending (market f/c: 0.6%). Energy will be a factor for the PCE deflator, but the core PCE deflator will be benign (market f/c: 0.2%). Further, robust housing demand should lift August construction spending (market f/c: 0.3%). Finally, FOMC’s Harker will discuss the economic outlook, whilst FOMC’s Mester will speak on inflation and employment