Daily Commentary BY THE CURVE TEAM –

Markets Welcome Geo-Political Reprieve

15th of August, 2017

Markets have appeared to enjoy a brief reprieve from the back and forth bluster from the US and North Korea overnight, reversing some of their recent moves. They weren’t too interested in the data that threw up some mixed reads from around the globe while the FOMC remained in the headlines thanks to vice-chair and New York Fed President Bill Dudley.

Bond and equity markets reversed some of their recent moves with yields rising off their lows while equity made up some lost ground as geo-political tensions eased on the lack of any new rhetoric from either side. With reports that North Korea has some missiles on the move, the reprieve could be short lived.

A mixed bag of data didn’t really pique the market’s interest. Japan’s GDP was quite impressive, positing a solid rise on the back of a lift in consumption and capital expenditures. The release was followed by the monthly activity indicators, which disappointed. Chinese retail sales, industrial production and fixed urban investment all missed estimates. The final key release was European Industrial production, which fell more than expected after a solid rise the previous month.

The FOMC just can’t keep itself out of the headlines with Bill Dudley overnight providing more comments on what the FOMC should be doing. He said he was still in “favour of doing another rate hike later this year” and said that the market’s expectations for balance sheet normalisation to commence next month were reasonable.

The flow of data and events continues with the RBA minutes from their August meeting due out this morning.

David Flanagan

Director - Interest Rate Markets