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Market Update

EncoreFX’s daily market updates are written by our experienced and professional dealing team.

Investors Spooked on Trade Truce Doubts and Slowing Growth

Published December 5, 2018

Global stocks fell sharply overnight with a fall of more than 2.5% as doubts weigh over the US-China trade truce. Confusion set in on trade talks as to what was actually agreed with a lack of detail from the Chinese side. A Chinese official said they will “wait for leaders to return” on Thursday before publicizing details. Both sides have 90-days to come to an agreement.

NZ Dairy Auction: Prices Up, Volumes Down

The Global Dairy Trade auction resulted in higher milk prices overnight, a surprise result following seven consecutive falls. The GDT Price Index rose 2.2% with an average selling price of $2819 per tonne, whilst volumes were down 15.2% from the previous auction. Fonterra will update their farm gate milk price forecast tomorrow with a number of analysts expecting them to cut their payout forecast.

RBA Holds Interest Rates

The Reserve Bank of Australia left interest rates on hold yesterday at the record low 1.5% as expected. Noting that inflation remains low and stable, employment is growing, and economy improving, but the improvement will be “gradual”. Almost 50% of economists expect the cash rate to remain on hold for at least another year.

US Treasury Yields Invert

The spread between 3-year and 5-year Treasury yields dropped below zero yesterday, with the gap in interest rates 2-year (2.80%) and 10-year (2.90%), narrowing to its smallest spread in more than a decade. Markets have traditionally considered an inversion of the 2-10-year spread to be a signal of an economic slowdown with central bank officials using this to gauge risks of a recession. Investors will continue to watch this closely.