Main Themes: Investor sentiment soured later in the session, as stockmarket losses drove bond yields lower. The US dollar, however, held onto its earlier gains.
Share Markets: The stockmarket weakened, led by the technology sector. Tesla plunged to its lowest in almost a year after the National Transportation Safety Board announced a federal field investigation. This followed a recent fatal crash and vehicle fire involving a Tesla vehicle. Grapics-chip maker Nvidia declined after it temporarily suspended its self-driving vehicle testing. Facebook fell on news its CEO Zuckerberg is expected to testify before the US House Energy and Commerce Committee. The Nasdaq fell 2.9%, the Dow lost 1.4% and the S&P 500 declined by 1.7%.
This reversal in the US stockmarket followed gains in Asian and European stocks. The Australian S&P/ASX 200 rose 0.7% yesterday, although the Australian stockmarket is expected to lose ground this morning, following the US moves overnight.
Interest Rates: US bond yields fell earlier in the session on likely portfolio rebalancing for month-end ahead of increased supply. The decline in yields continued as stockmarket losses drove safe haven flows into government bonds. The yield on the US 10-year government bond fell from 2.85% to 2.78%. The yield on the 2-year US government bond slipped from 2.27% to 2.26%.
Australian government bond yields (implied by futures) declined overnight taking their lead from the US market.
Foreign Exchange: The US dollar index (weighted against a basket of currencies) rose by 0.4% from yesterday morning. The Euro and Sterling weakened versus the US dollar. The Yen initially lost ground versus the broadly stronger US dollar, but reversed later in the session on safe haven buying.
Risk aversion weighed on the Australian dollar, which weakened versus the major currencies. AUD/USD fell from a high of 0.7758 yesterday morning, to trade around 0.7680 at the time of writing.
Commodities: Oil drifted lower, with solid global output, stockmarket losses and strength in the US dollar overnight weighing on the oil price. WTI oil slipped US$0.30 to US$65.30 per barrel.
Australia: No economic data released.
Europe: The final reading on Eurozone consumer confidence held at 0.1 for March. This was an unchanged result from February.
United States: Consumer confidence slipped to 127.7 in March, from 130.0 in February, according to the Conference Board measure. Both the present situation and expectations component softened in March. In February, consumer confidence was at its highest since late 2000. Despite the decline in confidence in March, the share of consumers who said jobs are plentiful rose to its highest since April 2001.
The Richmond Fed manufacturing index fell to 15 in March, from 28 in February. Consensus expectations had centred on a smaller decline.
House prices rose by a larger than expected 0.75% in January, according to the S&P CoreLogic CS 20-city index. For the year to January house prices rose 6.40%, up from an annual pace of 6.31% in December.
Today’s key data and events
NZ ANZ Business Confidence Mar prev -19.0 (11am)
EZ German GfK Consumer Confidence Apr exp 10.7 prev 10.8 (5pm)
US GDP Q4 annualised exp 2.7% prev 2.5% (11:30pm)
US Pending Home Sales Feb exp 2.0% prev -4.7% (1am)
Times are AEST. All data forecasts are m/m or q/q and seasonally adjusted unless otherwise specified. Forecasts for Australian data are our forecasts and for other countries they are consensus forecasts.
Jo Horton, Senior Economist