Market wrap: Sterling was the out-performer - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global Market Sentiment: Risk appetite continued to firm overnight, the Dow finally topping the widely watched 20k milestone for the first time in history (+155pts, +0.8%). The rise in stocks continues the larger rally that has been in place since Trump’s US election victory, built around the promise of tax cuts, infrastructure spending and deregulation. That said, there was no fresh pro-growth policy news today and if anything Trump’s administration’s has been focusing on less market friendly themes of border and immigration control. US yields pushed higher too but the USD was more circumspect, tracking largely sideways against EUR and JPY and edging lower against the commodity currencies. Oil was flat on the day ($53.20/bbl) while gold fell $10.45/oz amid buoyant risk appetites ($1198.45/oz).

President Trump is set to sign two executive orders today, one calling for a large physical barrier on the border with Mexico and another to tighten immigration enforcement inside the US.

Currencies:

GBP was an outperformer again today, rising to 1.2629 (+0.8%), its highest levels since mid-Dec 2016. EUR chopped around between 1.0710 and 1.0770, ending the session largely flat even though the German IFO survey was weaker than expected and US yields rose +6bp across the curve – more than elsewhere, USD/JPY tried to rally above 114.00 but is ending the session at 113.65. AUD initially extended earlier losses following the weaker than expected Q4 Aus CPI, hitting a low of 0.7515 but firm global risk appetite helped AUD reverse losses back to 0.7555. NZD continued to grind higher, briefly touching another new high (0.7286) for this new year rally, while CAD continued its outperformance of recent days, USD/CAD falling 0.7% (1.3070).

Interest rates:

US 10yr yields rose 6.3bp to 2.5283%. The correction lower in yields late last year and into the new year appears to have run its course though the US 10yr still remains shy of the 2.6394% highs hit during the peak of “Trump euphoria” mid Dec 2016. German 10yr bund yields hit their highest levels in a year (0.473%, +5bp on the day)."