US interest rates, most commodities, and equities all rose - Westpac

Analysts at Westpac's market wrap up of a temperate risk-on US session...

Key Quotes:

"Global market sentiment: US interest rates, most commodities, and equities all rose – the S&P500 making a fresh record high. Solid earnings by US companies plus decent economic data helped.

Bellwethers Caterpillar and McDonald’s beat analysts’ estimates, helping indices to fresh highs and pushing the VIX index (a barometer of risk aversion) to all-time lows. US consumer and manufacturing surveys were strong, as was German business confidence.

Interest rates: US 10yr treasury yields rose from 2.25% to 2.33%, and 2yr yields rose from 1.36% to 1.39%. Fed fund futures yields firmed slightly, pricing the chance of a December rate hike at around 47%. Germany’s 10yr yield rose from 0.50% to 0.57%.

Currencies: The US dollar index initially fell to a fresh 13-month low but later retraced to be up 0.1% higher on the day. EUR jumped from 1.1650 to 1.1712 following the strong IFO German business confidence data, but later retraced. USD/JPY rose from 110.80 to 111.94. AUD remained elevated, ranging between 0.7920 and 0.7970. NZD slipped a bit, from 0.7450 to 0.7410, perhaps affected by news of a disease detected in one NZ dairy cow herd. Post McDermott, it’s modestly lower again at 0.7405. AUD/NZD firmed slightly from 1.0660 to 1.0714.

Economic Wrap

US Conference Board consumer confidence rose from 117.3 to 121.1 (vs 116.5 expected) – a 16-year high. Richmond Fed manufacturing rose from 11 to 14 (vs 7 expected). Corelogic house prices rose 0.1% in May, for a 5.7% annual gain (vs 5.8% expected; vs 5.8% in April). All 20 cities in the survey posted annual gains, low inventories supportive.

German IFO business confidence rose from 115.2 to 116.0 (vs 114.9 expected) – an all-time high, which is surprising given the disappointing PMI reading. Current conditions are strong but future expectations are more subdued.

RBNZ Assistant Governor McDermott spoke a few minutes ago on economic trends and its inflation target, with comments on the neutral cash rate (3.5%, which means 1.75% is stimulatory), inflation (sideways trend in core), and the exchange rate (lower would help)."