It has been a quiet start to the week with little newsflow. US equities have bounced back after last week’s losses. US Treasuries are little changed, with the 10-year note finding support just under 4.5%. For a change, the USD is broadly weaker, falling against all majors apart from the yen. The NZD hit a fresh 2024 low below 0.5840 before recovering to 0.5885.
On a quiet day for news, stories about president-elect Trump seem to dominate the news stream. For the market, there is keen interest in his appointment of Treasury Secretary. Support for Lutnick and Bessent looks to have diminished, with the pool of candidates opening up to include ex Fed Governor Warsh. Media reports tell of some in-fighting amongst Trump’s advisors about who should get this coveted role.
US equities have opened the week on a positive note, with the S&P500 up 0.4% in early afternoon trading, recovering some of last week’s 2.1% loss. Gains have been broad-based, with Tesla one of the top performers, gaining 7%, with talk that Trump’s team hopes to push forward with a new framework to regulate self-driving vehicles.
The economic calendar has been sparse. US home builder sentiment rose to a seven-month high, with the NAHB index rising 3pts to 46, with the greatest increase coming from the 6-months-ahead outlook component. Builders noted uncertainty around the presidential election as restraining sales recently. With that risk cleared and talk of looser regulations, confidence in the outlook has improved, despite the recent lift in mortgage rates. The data continued the run of positive US economic surprises, with Citigroup’s index rising to a fresh nine-month high.
US Treasury yields show little net movement. The 10-year rate found some support just under 4.5%, rising to as high as 4.49%, before buying interest returned and it currently trades at 4.42%.
The USD was strong, but sentiment turned as the NY trading session opened and the currency has since seen some steady selling pressure, falling against majors apart from the yen for the day. The DXY index is down 0.3% since last week’s close. The yen weakened after traders were disappointed that BoJ Governor Ueda didn’t provide a hint that the Bank might raise its policy rate in December. Recent yen weakness gave him an opportunity to provide some support, but he chose not to. When asked about policy following a speech, he simply reiterated that risks and additional information since October would be assessed at the meeting.
The NZD fell to a fresh 2024 low of 0.5836 before the swing in the USD saw it recover to 0.5885. The recovery in the AUD saw it break up through 0.65. Relative to last week’s close, the NZD is flat to marginally weaker on all key crosses apart from the yen, where it is up 0.7% to just over 91. NZD/AUD has nudged down to 0.9050. Movements against EUR, GBP and CAD have been insignificant.
Oil prices are up nearly 3%, with Brent crude trading at USD73 per barrel. Prices have been supported by geo-political risks, with the US giving the green light to use long-range missiles inside of Russia, and European supply outages in Norway and Kazakhstan.
In the domestic rates market yesterday, NZ yields fell in line with global moves. NZGB yields were down 3-4bps across the curve and swaps were down 3-5bps. NZ economic activity data continued to show a lack of pulse. The PSI ticked higher to 46.0 but remained well in contractionary territory. The composite PSI/PMI index is still consistent with the economy contracting. Job ads continued to trend lower, consistent with a steadily rising unemployment rate.
On the economic calendar ahead, the ECB releases its quarterly survey of wages. US housing starts/permits and Canadian CPI data are also released.
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