Fundamental analytics

US equity markets are gaining amid rising yields and a weakening dollar

The most significant event of the current week at the time of Thursday Wall-Street start is, in our opinion, the recovery of equity markets after last week sell-off, while the bond yield continued to rise after data on US inflation. Given the rising yields and  the growth of stock assets, the sales and decline of USD dollar looks unusual at least in the context of last months. Or maybe it's just a new logic of the market.

Last week, the general consensus was that the equity markets were hit by interest rate shock. This week equities are traded higher, and the yield continues to grow. European yield curves are also generally higher. The yield of German 10-year bonds Bund is approaching the monthly maximum, which is the highest since August 2015. The continued Japanese yen gaining is contrary to the growth of US yields and the simultaneous growth of stocks. At the same time, the VIX volatility index dropped to the level of 17 points, which is the minimum value for the last two weeks.

Asia followed the US shares and traded higher. MSCI Asia Pacific grew by 1.40%, although several markets were closed due to the launch of the Lunar New Year celebration. European stocks are also growing. If they manage to display end of day in the green, this will be the second positive close in a row. However, the restoration does not seem so much certain.

Today, US economic calendar is filled with important data and figures. Jobless claims data in the focus. Producer prices are likely to recover from the December lows. Later, industrial production will be reported.

The US dollar is under pressure, but today's losses do not go in comparison with previous session decline. The dollar index is not far from of the minimum level set at the end of January (88.40), the lowest level since the end of 2014. The Euro is testing its local highs and is consolidating at the start of America at 1.2510.

The British pound continues to recover amid the general weakness of the US dollar. With the second round of talks on Brexit, there is more questions than answers. Not so long ago, the parties exchanged quite harsh attacks and in fact the news flow on this issue dried up.

Tomorrow the mood in the market can already change as we are waiting for another portion of statistics from the UK, which has already accustomed us to frustration due to poor data. But this is a completely different story, which will be played by the market only tomorrow.

chartchart

New articles