Overnight we have had CPI data from Australia, coming in at 3.6%, above the 3.4% forecasted. The previous reading was 3.5%, with increasing rent, alcohol and transport prices behind the increase. The Reserve Bank of Australia has all but ruled out a cut in interest rates this year, with a few economists now predicting that central bank could hike rates due to stubborn inflation, the data triggering a selloff in Australian bonds. Asian stocks and bonds have also dropped, Hong Kong led losses in equities with the MSCI Asia Pacific Index falling for a second day, while Japanese yields hit their highest levels since 2011. Higher for longer US rates has further weakened Asian currencies against the Dollar, China's Yuan slipping to the lowest level since November, while similar moves were seen amongst emerging currencies in the region.
In US markets yesterday, the Nasdaq hit new highs, ending up 0.6%, having previously hit 17,032.655, above 17,000 for the first time. Tesla was the only member of the magnificent seven that didn’t finish higher, while Nvidia surged 7.1% to close at yet another record high. US markets were mixed overall, the S&P 500 rose less than 0.1% as strong gains for energy and technology stocks balanced declines in every other sector. Treasuries sold off, pushing yields higher. The yield on the US 10- and 2- year notes, were up to 4.54% and 4.98% respectively.
In Oil markets, a further attack in the Red Sea has further heightened geopolitical tensions, as we head towards and OPEC meeting at the weekend, it is expected that producers will keep voluntary production cuts, WTI was up 2.7% at $79.83 per barrel yesterday, its biggest one-day gain since March. Coffee has also seen a rally recently, with Robusta coffee gaining 7% over the last week due to lack of rain in Vietnam. Prices are nearly back to start of month contract highs on drought patterns across Vietnam. Brazilian coffee analysts continue to re-iterate the healthy production of both Arabica and Robusta beans in Brazil, which could become the global replacement used in instant coffees this coming year.
Data today includes Germany CPI at 9am, followed by Fed’s Beige Book and John Williams speech this evening.
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