Global market wrap: plenty going on - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: Data releases remained light, despite the return of US markets, but less hawkish tones from ECB members, concerns that the German coalition may face distinct hurdles this coming weekend and a decent pullback in UK’s core CPI added to the less USD negative tone from Asia. The relatively sharp pullback in commodities and only a minor lift above initial expectations for the GDT auction saw both AUD and NZD retreat. Yields edged lower in Europe (10yr Bund at 56bps) whilst they held steady in US and generally solid earnings data helped stocks push to new highs.

Interest rates: US yields lifted to effectively unchanged (2.55%) after a pre-US open drift to test 2.52% on the back of softer yields in Europe (Bunds 56bps, 10yr Gilts 1.30%). The pullback in Bunds and Gilts were due to a notably less hawkish tone from ECB officials today and UK’s CPI edged below estimates, affirming the likely peak in inflation. The US 10-30yr spread moving below 30bps was a clear point of interest.

Currencies: A clawing back of only a small amount (around +0.25% on the day, but +0.5% off extremes) of USD losses seemed more meaningful than the actual moves due to the change in market tone. At present this seems like a pause, but recent moves in EUR, AUD and especially NZD had become technically stretched. The lack of a surge higher in GDT left BZD underperforming as AUD/NZD edged back towards 1.0950."