Global market wrap: US economic data was resoundingly strong – ANZ

In a global market wrap, analysts at ANZ Bank New Zealand Limited (“ANZ”) US economic data was resoundingly strong and budget worries in Italy eased on the coalition’s plans to rein in fiscal deficits over time.  

Key Quotes:

“Treasury yields rose, hitting levels last seen in 2011, with a solid ADP report and a booming ISM non-manufacturing driving the move. The US 2-year yields climbed 5bps to 2.86% with the 10-year up 10bps to 3.18%.  

Global yields generally followed treasuries higher. Italian yields fell 15-30bps across the curve on more conservative budget details.  

Equities are taking the rates move in their stride with Dow Jones up 0.6%. US equities were led higher by financials and industrials with real estate and utilities on the decline.  

The USD is rising and commodities are slightly higher. The USD was stronger against all in the G10 with NZD and AUD leading declines. Oil dropped sharply after a larger than expected inventory build, but later rebounded.”

DATA/EVENT PULSE

STRONG: “ISM non-manufacturing came in well above expectations with underlying details strong all around. The print came in at 61.6, compared with market expectations of 58 and two points above even the most bullish market estimate. The measure of business activity is at the highest level since January 2004 and the employment index is at a record high. ADP employment came in at 230k, compared with market expectations of 184k.”

SCRIPT:  “The Fed’s Harker stuck to the script saying the Fed can take its time moving up rates and that there are some risks in the yield curve. Fed’s Barkin said that tariffs are having little effect. On the path of interest rates, he says that “conditions as we sit today continue to call for making the moves that we’ve said we are going to [make]”.”

OIL:  “Oil prices fell as the US reported a much larger than expected build in inventories, but later rebounded to be up 1.1% overall. This added to bearish sentiment after Saudi Arabia said they had raised output to 10.7 million barrels per day in October, just shy of their record November 2016.”