Daily Market Analysis – Treasury Yields Continue To Fall

Equities:
Markets took a slight breather Tuesday following Monday’s sell off, with the exception of Japan’s Nikkei 225, which was responding to Monday’s fowl U.S data. Japan’s Nikkei 225 tumbled 325pts to 8,824. In addition to the negative U.S data, the JPY’s strength has Japanese investors worried as exports will drop off. European markets posted small gains with the FTSE 100 adding 23pts to close at 5,225 and the Stoxx Europe 50 added 2pts to finish at 2,449. In the U.S, the Dow Jones Industrial Average picked up 5pts to close at 10,014. The ratio of advancers to decliners was near even. Basic Material rose by 1.01% while Industrials fell by 0.65%.

Commodities & Treasuries:
As fear of a global wide slow down continues to grip the broader market, commodity prices have begun to falter. Copper dropped $6 to $336, while Oil tumbled $2.30. Oil is approaching strong support at $71 and closed Tuesday at $71.65. Gold has been the beneficiary of risk aversion as it gained $10.30 and closed above mid term resistance to 1,247. In the bond market, U.S Treasuries have also been the beneficiaries of risk aversion as the U.S Treasury 2.625% 10-yr note trades a premium at 101-12 corresponding to a shockingly low yield of 2.47%. The back end of the yield curve continues to flatten as the treasury 30-yr yield hit 3.50%.

U.S Treasury 10-yr

U.S Treasury 10-yr

Currencies:
The Dollar traded flat on Tuesday as the equity sell off took a one day break. The DXY fell 0.20pts but remained firm above 83. The EUR added a few points on Tuesday, but could not close above 1.27. The GBP fell through both it’s 200 day and 50 day moving averages as it lost 100pips to close at 1.5345. The JPY resumed it rally call falling back to key resistance levels at it closed just above 84. Commodity currencies lost significant ground yesterday as commodity prices fell sharply. The CHF closed at 1.0150 as it races towards Dollar parity.

Economic Outlook:
The dismal outlook continues as we saw Canadian GDP miss expectations after printing at 2.0% versus 2.5%. There was some good news in the U.S with Case Schiller Home Price Index rising to 147.97 as well as U.S Consumer Confidence beating expectations at 53.5 versus 50.7. However, the Chicago Purchasing Manager Index fell to 56.7 versus 62.3 last month. Looking ahead to today Australia’s GDP will print and in the Germany, the Purchasing Managers Index will show. All eyes will then turn back to the U.S  with the ADP Employment Change due out as well as ISM Manufacturing figures to be released. Lastly, U.S Construction Spending figures will print.

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