19/04/2024 09:18

Global Markets

US stocks struggled overnight, although the Dow did manage to close +0.1% higher, helped by an almost 3% advance by United Health Group (UNH US). The issue for stocks was again a weakness in the treasury market after more solid economic data overnight, in this case, on the jobs front. Most of the economic reads we’ve seen this week have pointed to an economy firing on all cylinders, which is not ideal for the Fed hoping to start cutting interest rates in 2024. Even Dr Copper is painting the picture of strong global growth after rallying another 2.2% overnight, posting another 14-month high in the process.

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15/04/2024 09:08

Interest Rates / Bond Yields

Australian 3-year bond yields edged higher last week as hopes for rate cuts in the near future fade. Global inflation appears to be increasingly sticky, and this concern will increase if Middle East relations deteriorate further, sending oil prices higher in the process. In the short term, a test of 4% wouldn’t surprise us, but ultimately, we’re targeting another leg on the downside through 2024/5.

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11/04/2024 09:27

Global Markets

US stocks fell overnight after the strong CPI, which is likely to have sealed the fate of the Fed's June meeting, with a cut now very unlikely. Two more CPI reports and two Personal Consumption Expenditure (PCE) reports are due out before the Fed’s June policy meeting, but at this stage, it's 1-0 to the Hawks. With the hope of 2-3 rate cuts in 2024 rapidly evaporating, a huge tailwind for the market and specifically rate-sensitive names is being removed. Hence, a pullback feels increasingly likely.

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10/04/2024 09:25

First Up

Overnight, the influential former Federal Bank of St. Louis President James Bullard said he's expecting three rate cuts in 2024 as inflation moves towards the Feds target even while the economy remains resilient, i.e. the “Goldilocks” scenario for stocks. Bullard’s outlook echoed the Fed’s messaging as opposed to the increasing market expectations that two cuts have become more likely than three, e.g. Treasury yields made new highs for the year on Monday night. Mr Bullard is indirectly quoting the old adage of “don’t fight the Fed”.

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03/04/2024 09:17

Global Markets

US indices struggled overnight as they digested the decreasing likelihood of interest rate cuts in the near future, accordingly the largest weights on the market overnight came from the rate sensitive healthcare and real estate stocks as US Treasury 10-year yields rose to their highest level since late November. Tesla (TSLA US) caught our eye for the wrong reasons falling -4.9% as the car maker posted lower quarterly deliveries for the first time in almost 4-years – it doesn’t belong in the “Magnificent Seven” in our opinion,  it should simply be the “Super Six”.

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02/04/2024 09:07

Interest Rates / Bond Yields

US bonds appeared to forget Friday's PCE print last night, focusing instead on the manufacturing PMI, which increased to 50.3 last month, the highest and first reading above 50 since September 2022, up from 47.8 in February, i.e. the likely trigger for stocks to fall away throughout the session. The US economy remains strong, which could delay the Fed's timing of rate cuts; at MM, we believe cuts are coming but probably at a slower pace than many expect/hope for. 

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25/03/2024 08:39

Interest Rates / Bond Yields

Australian 3-years edged lower last week, taking more of its lead from the FOMC than the strong local employment data. However, a cursory glance at their chart shows they’ve been in a holding pattern through 2024, trading midway between 3% and 4%. Our preferred scenario is that we will see a test of the former over the coming months.

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18/03/2024 09:05

Interest Rates / Bond Yields

Australian 10-years edged higher last week following the robust US economic data, but they appear comfortable around 4%, where they’ve spent most of 2024. Over the last 18-months, the 4% area has been the average yield for the 10s, with 1% swings either side. Our preferred scenario moving forward is another foray on the downside, which would unfold if the RBA gets inflation firmly under control.

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15/03/2024 09:14

Global Markets

US stocks struggled overnight after strong economic data reduced confidence that the Fed would commence cutting rates in June. However, it still remains a case of “when, not if.” US Treasuries surged higher after the PPI came in at 0.6%, well ahead of the 0.3% forecast by economists concerning many that inflation is not yet entirely under control. The Producer Price Index measures the rate of change in prices of goods leaving the factory and is an important measure from the Feds perspective.

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11/03/2024 09:00

Interest Rates / Bond Yields

Australian shorter-dated yields edged lower following Powell and Lagarde's dovish rhetoric. As the saying goes, “Don’t fight the Fed.” In this case, it’s the Fed, ECB, and BOE! If we see a market-friendly US CPI this week, bond yields could easily make fresh 2024 lows.

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