Recession fears subside as treasury yields stabilise

Stock Markets

Australian shares are poised to open higher today as the bond yield curve narrowed causing investors to move beyond recession fears. The US Treasury yield curve between 3-month and 10-year notes remain inverted, however, the gap has narrowed. Investors digested weak consumer confidence data which indicated a drop in the consumer confidence index from to 124.1 from 131.4 in February, which is the second lowest rate in a year. In addition to the weak consumer confidence data, weak housing data was also released and showed that US homebuilding fell more than expected in February.

Wall Street’s major indexes continued to rebound after the recent market-wide sell off triggered by fears of slowing economic growth and recession concerns following the inversion of the US Treasury yield curve. The Dow Jones, S&P 500, and NASDAQ 100 all ended in positive territory, with the indexes gaining 140.9 (+0.55%), 20.1 (+0.72%) and 53.98 (+0.64%) points respectively.

The benchmark S&P/ASX200 index closed down 4.4 points (+0.07%) on Tuesday, bolstered by strong gains in the utilities and mining sectors which offset losses in energy shares. The utilities and mining sectors were collectively up 1.44% and 0.72% respectively, while the energy sector continued to post losses with the sector collectively down 1.08%.

ASX 200 futures are currently up 10 points. 

Today’s data releases: RBA assistant governor Kent speaks, RBNZ OCR decision, China industrial profits February, US trade balance January

Commodities and Currencies

Oil prices rose sharply on Tuesday as OPEC supply cuts and expectations of lower US inventories outweighed growing concerns about weaker demand due to a global economic slowdown. Brent crude and WTI crude were up overnight at US$68.00 (+1.18%) and US$59.94 (+1.90%) respectively.

Iron ore prices are currently down 0.7% at US$85.23 per tonne.

The spot price of gold is currently down 0.49% at US$1315.27.

The AUD is currently marginally down 0.03% at US71.33¢.

This article was written by Mithun Fernando – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3633.