6 things Australian traders will be talking about this morning

Matthew Stockman/ Getty.

Good morning.

To the scoreboard:

Dow: 23,420.52 +62.28 (+0.27%)
S&P 500: 2,581.18 +2.33 (+0.09%)
AUD/USD: 0.7550 -0.0014 (-0.19%)
ASX200 SPI futures (December contracts): 5,983 (+22)

1. Euro jumps around: The euro had a volatile session but stayed resilient in the wake of political turmoil in Germany. After facing downside pressure in Asian trade yesterday, it briefly rallied back above $US1.18 overnight before an equally sharp fall. And Germany’s DAX stock index rose by 0.5% despite the uncertainty. Here’s last night’s move in the euro, via Investing.com:

2. US bond winds blow: US government bond yields edged higher again overnight, with sharper moves in 2-year and 5-year notes. Combined with a small decline in Australian bond rates, the yield spread on Aussie and US 2-years is now almost at parity for the first time in over 15 years, with a difference this morning of less than 3 basis points.

3. AUD hanging by a thread: Most analysts agree that a narrowing yield spread is one of the main factors weighing on the Aussie, and Morgan Stanley sees the AUD sliding to US65 cents by 2019 as it loses its standing as a high-yield currency. The Aussie remains at a 5-month low ahead of this morning’s RBA minutes from the November meeting (11:30am AEST). The minutes follow another relatively neutral statement on interest rates, although the bank did sound a warning on household debt.

4. Speaking of bonds: Overnight moves in developed markets were nothing compared to the volatility in Turkish government debt. Benchmark 10-year bonds in Turkey spiked by 29 basis points to their highest level on record, amid continued political tension with the US. The US dollar also gained more than 1% against the Turkish lira.

5. Stocks take a breather: US markets edged higher overnight on low volumes ahead of the thanksgiving holiday later this week. Most analysts expect the S&P500 to continue climbing next year, but Societe Generale warned that if benchmark US 10-year treasury yields reach 2.5% it would imply a 7% correction for US stocks. Yields on US 10-years ticked higher overnight to reach 2.37%.

6. Iron ore gets a boost: Spot prices for benchmark 62% fines climbed to the highest level since September 27 and futures markets closed higher again overnight. Gold gave back all of its gains after hitting a one-month high in a risk-off session on Friday, falling by 1.5% to $US1,277 an ounce.

Have a great day.

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