Market wrap: North Korea’s missile tests, US dollar, bond yields, and equities fell - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: The US dollar, bond yields, and equities fell; concerns about North Korea’s missile tests to the fore. Also contributing were disappointing US data, dovish Fedspeak, and hurricane Irma.

Interest rates: US 10yr yields fell from 2.14% to 2.06% - the lowest since November. 2yr yields fell from 1.33% to 1.29%. Fed fund futures yields fell, now pricing the chance of a December rate hike at around 34% (from 40%).

Currencies: The US dollar index is down 0.4% on the day, with most of the decline coming after the disappointing durable goods orders data. EUR eked a higher 1.1880-1.1940 range. USD/JPY fell from 109.55 to 108.63. AUD rose from 0.7960 to 0.8028 before retreating to the 0.8000 area. Outperformer NZD rose from 0.7170 to 0.7264, despite a disappointing GDT dairy auction. AUD/NZD fell from 1.1120 to 1.1030.

Economic Wrap

US durable goods orders were finalised for July, and showed a 6.0% fall (vs -2.9% expected). However, the fall mostly reflected large aircraft orders in June, the ex-transport measure rising 0.6%. Factory orders fell 3.3% in July (as expected), with gains in non-durable orders.

Fed moderate/dove Brainard remained concerned about recent low inflation and felt increasing rates more gradually than the median forecast was prudent, but was ready to start shrinking the balance sheet. Dove Kashkari said rate hikes may be doing real harm to the economy.

The GDT dairy auction resulted in prices overall little changed – the index up 0.3%. Fats outperformed (butter up 3.8%), but powders disappointed, with WMP down 1.6% (compared to futures pricing a 3% rise)."