Analysts at Westpac offered their market wrap from Friday's US session close.
Key Quotes:
"Global market sentiment: The US dollar, interest rates, and equities were little changed on Friday night, amid a series of Fed speeches. Germany’s government underperformed polls in its election on Sunday, while NZ’s election produced no clear winner.
Interest rates: US 10yr yields ranged sideways between 2.24% and 2.26%, 2yr yields between 1.42% and 1.44%. Fed fund futures yields continued to price the chance of a December rate hike at 71%.
Currencies: The US dollar index closed Friday little changed. EUR made a round trip from 1.1950 to 1.2004 and back for little net change, but the German election result is expected to weigh when it opens this morning. GBP was the worst performer, following a speech by PM May, and Moody’s downgrade to Aa2, falling from 1.3596 to 1.3451. USD/JPY ranged around 112.00. AUD rose from 0.7940 to 0.7986. NZD rose from 0.7280 to 0.7344. AUD/NZD slipped from 1.0897 to 1.0842, iron ore shedding 3.8% to a two-month low.
Economic Wrap
US manufacturing PMI rose from 52.8 to 53.0 (as expected). The employment component rose, but new orders fell.
Fedspeakers included Kaplan (open minded about another rate hike in 2017), George(need to keep rate hike momentum), and Williams (“2.5% is about the new normal” for the Fed rate).
Eurozone manufacturing PMI rose from 57.4 to 58.2 (vs 57.2 expected).
The United Kingdom was downgraded from Aa1 to Aa2 by Moody’s, which cited a weakening growth outlook which would lead to fiscal pressures.
Germany’s election resulted Merkel’s CDU/CSU losing 8.4ppts to a 33.1% share, according to the first estimates. Junior partner SPD lost 5.3ppts to around 20% and said it want to be in opposition, while right wing AfD (anti-euro) surprised with a 13% share.
NZ’s election result (with 10-15% of the total – specials - yet to be counted) did not produce a clear majority for either of the major parties, and a period of coalition negotiations will now ensue."
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