Global market sentiment improved this past week. On Wall Street[1], futures tracking the Nasdaq[2] 100, Dow Jones and S&P 500[3] gained 7.25%, 5.25% and 6.34% respectively. In Europe, the Euro[4] Stoxx[5] 50 and FTSE 100[6] both climbed roughly 2.75%. Meanwhile, in the Asia-Pacific region, Japan’s Nikkei 225[7] and Australia’s ASX 200[8] rose 1.23% and 0.77% respectively.
Stock traders found some comfort in weakening government bond yields. The 2-year Treasury yield weakened 3.83% last week and is down over 10% from this year’s high so far. The finalized University of Michigan survey of inflation expectations unexpectedly cooled for June, perhaps an early stage that inflation might have found a turning point.
As a result, the US Dollar[9] weakened against its major peers, suffering from a combination of improving sentiment and falling Treasury yields. One would think that the sentiment-linked Australian and New Zealand Dollars would perform handsomely in this environment, but that was not the case. Bond yields fell more strongly in Australia and New Zealand, hurting AUD[10] and NZD[11].
Australia is an economy closely tied to the global business cycle, making it vulnerable to rising fears about slowing growth across the world. Speaking of which, this will likely become the next big theme in the coming months as central banks tackle high inflation. Trying to reverse rising prices is one thing, but subsequently finding a sweet spot without overshooting is another.
It is also not surprising to see crude oil prices[12] soften amid rising concerns about recessions. The commodity is quite heavily linked to global growth estimates. Bitcoin[13] prices have also
