Global sharemarkets were mostly weaker again overnight as key long-term bond yields remained elevated, hitting investor sentiment.
Global bond yields, led by the benchmark US 10-year bond yield, have climbed in recent months, driven by a combination of better economic data, monster debt issuance from the US government, a policy switch from the Bank of Japan, and last week’s surprise US downgrade from rating agency Fitch.
Longer-term bond yields impact everything from portfolio management to project feasibility outcomes and the recent sharp rise – the US ten-year has climbed from 3.30% in May to 4.00% overnight – has weighed on market sentiment.
Last night, US shares saw further losses, with the S&P 500 falling 0.7% and the tech-focused Nasdaq down 1.1%.
FX markets mostly weaker
With global sharemarkets lower, risk-sensitive currencies like the Australian dollar also weakened.
The AUD/USD fell 0.3% with the Aussie lower in other major markets. The AUD/EUR was hardest hit, down 0.4%.
The kiwi was also lower, with the NZD/USD falling 0.2% and the NZD/EUR losing 0.4%.
The greenback was more mixed in Asia, however.
The USD/CNH fell 0.3% with the Chinese yuan stronger despite a negative result in yesterday’s consumer and producer price indexes.
The USD/SGD fell 0.1% while the USD/JPY gained 0.2%.
US CPI looms
Global fixed income markets will remain in focus with tonight’s US inflation numbers key for the Federal Reserve’s decision-making process – and bond prices.
Forecasts are looking for a small increase in the headline numbers – up from 3.0% in June to 3.3% in July in annual terms – as the recent rise in crude oil impacts on energy prices.
However, because the US has made good gains in lowering headline inflation, it will be the “core” number, which excludes volatile energy and food prices, that will be the main focus.
Core inflation is forecast to remain stuck at a still too-high 4.8%.
Greenback supported as global shares fall
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 7 – 11 August
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
