Global equities continued the very volatile and choppy trade that has dominated recent market action. US Bond Yields hit a sharp reversal, with the 10 year retreating sharply below 3%. US equities also stabilised, but the current environment suggests maybe a ‘dead cat bounce’? The important German ZEW Economic Sentiment report remained heavily negative, but an improvement on the previous calamatous edition. Stabilisation is the best that can be hoped for in this market, with the growing threats of recession and the COVID lockdowns hitting supply-chains from China. The EUR remains vulnerable, trading 1.0530, while the GBP holds above 1.2300.
Commodity demand has been weaker and thus further downside pressure has been felt. Chinese lock-downs and demand questions are influencing commodity demand and impacting the associated currencies. The NZD crashed below 0.6300, while the AUD fell to under 0.6950, leading into the Federal election. The election will begin to impact the currency, as polls indicate a change in Government, which may see the alternative Labor led option prevailing. This would normally lead to a weaker currency, as perceptions are of more aggressive fiscal expenditure, although the differences over recent years are marginal. The prospect of a ‘Hung Parliament’ would be hugely destabilising for markets.