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Aussie bonds track US to edge higher

Share Markets:

Investor sentiment was moderately upbeat on Friday night, boosted by an increase in the oil price.

The Dow rose 0.2%, the S&P 500 gained 0.3%, while the Nasdaq was up 0.1% for the session.

This followed larger increases in Europe, with the Euro Stoxx up 1.4% and the UK FTSE 100 lifting 1.1% for the session.

After a soft session on Friday, the Australian S&P/ASX 200 is expected to open stronger this morning.

Interest Rates: 

US government bond yields rose as risk appetites picked up, dampening demand for safe-have government bonds.

Australian government bond yields (implied by futures) edged higher, tracking the move in US government bond yields.

Foreign Exchange:

The US dollar index (weighted against a basket of currencies) fell on Friday night. A lift in investor sentiment softened demand for the US dollar.

The Euro and Sterling gained against the US dollar.

Despite improved risk appetites, the US dollar edged a little lower against the Yen for the session and is sharply lower over the week.

This move has fuelled speculation about the possibility of currency intervention from the Bank of Japan.

The Aussie dollar strengthened against the US dollar, with AUD/USD rising from a low of 0.7500 early Friday morning, to currently trade around 0.7554.

Commodities:

The oil price jumped by US$2.50 to US$39.70 per barrel on news of a drawdown in US crude stockpiles.

A report that Russian crude output fell in April was also supportive of the oil price.

Australia: 

There was no economic data released locally on Friday.

United Kingdom:

Industrial profits fell 0.3% in February, defying consensus expectations for a small increase. For the year to February, industrial production is down 0.5%.

The UK trade deficit was larger than expected, although it narrowed to a deficit of £4840m in February. This was from a downwardly revised deficit of £5234m in January (previously reported as a deficit of £3459m.)

United States: 

Wholesale inventories were weaker than expected, falling by 0.5% in February.

This followed a downwardly revised decline of 0.2% in January (previously reported as an increase of 0.3%).

Wholesale sales also declined, falling 0.2% in February. The fall in US inventories could weigh on Q1 GDP.

New York Fed President Dudley said "a cautious and gradual approach to policy normalisation is appropriate." He also noted the balance of risks remain "tilted slightly to the downside."

Topics:  economic report economy st george



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