CURRENCY MARKET WRAP
As of Wed, May 8, Singapore Time zone UTC+8
Dollar Index +0.05%, 97.58
USDJPY, -0.46%, $110.26
EURUSD, -0.09%, $1.1190
GBPUSD, -0.23 %, $1.3068
USDCAD, +0.16 %, $1.3469
AUDUSD, +0.26%, $0.7008
NZDUSD, +0.26%, $0.6596
Markets began the day offered after USTR Robert Lighthizer accused China of reneging on its prior commitments, and said the higher 25% tariff rate on $200 billion of Chinese imports will go into effect on Friday. China is prepared to impose retaliatory tariffs on U.S. imports, but it will still send Vice Premier Liu He to Washington to continue trade talks later this week.
The 2-yr yield declined three basis points to 2.28%, and the 10-yr yield declined five basis points to 2.45%. The U.S. Dollar Index increased 0.05% to 97.58.
In RBA, the bank kept Australia’s cash rate steady at 1.5% in May, maintaining the period of policy stability that’s been in place since August 2016. Lowe trimmed his forecast economic growth for this year by a quarter point to 2.75%. But he remained bullish on the labor market, describing it as “strong” and maintaining that unemployment would stay around current levels of 5% before falling in time to 4.75%. The annualised inflation rate of 1.3%, well below the RBA’s target band of 2-3%, proved insufficient to force Lowe’s hand just 11 days out from the federal election. Inflation might be weak but unemployment is still falling and that was the key. Economists and market analysts predict the RBA will be forced to act in the coming months.
S&P500, -1.65%, 2,884.05
Nasdaq, -1.98%, 7,640.15
Nikkei Futures, -2.37%, 21,603.0
All 11 S&P 500 sectors finished lower as investors also sought to de-risk after a strong start to the year with an understanding that a meaningful trade resolution may take longer than expected. Nine of the 11 sectors finished with losses of at least 1.0%.
The trade angst also contributed to general growth concerns, which were manifested in lower oil prices ($61.24/bbl, -$1.01, -1.6%) and relative weakness in the cyclical sectors. The trade-sensitive S&P 500 information technology (-2.1%), industrials (-2.0%), and materials (-1.8%) sectors were among Tuesday’s worst-performers.