In what was a rare sight for this week there were green numbers on the major US indices heading into the afternoon session, with a rebound in the tech sector leading the broader market advance.
Whether this was due to the weaker US data on Durable Goods Orders (which perhaps was optimistically interpreted as a sign that further weak US data may slow down rate hikes), or whether it was the Thanksgiving holiday mood putting a positive tone on things, its difficult to say. But either way it was a day of calmer trading conditions rather than the rampant selling we have seen lately.
With stocks on the rise, demand for bonds fell, with US Treasury yields climbing as risk-aversion abated. A pullback in the US Dollar also contributed to the modest rise in Treasury yields on the eve of the Thanksgiving holiday.
The weaker US Dollar story also had an effect in the commodities and metals markets, with the spot gold price gaining primarily due to a depreciation in the greenback. The spot gold price moved half a percent higher to US$1228 per ounce, with the precious metal now around US$8 higher than its monthly lows reached last week.
The crude oil price continued with its volatile trading pattern, but this time the move was to the upside, with the WTI price moving 1.7% higher heading towards its daily settlement. While it was undoubtedly a positive day for crude, the price moves today didn’t quite manage to even recover one third of the previous day’s losses, with the same supply-side concerns still acting as a weight on the oil price. So yes, it was a bounce in the oil price but only a modest one at best.
On the data front, US Crude Oil Inventories were up 4.9 million barrels last week, which was more than expected but not enough to derail the upward move today in WTI, most likely because it was well below the massive 10.3 million-barrel increase from last week.
Heading into the US holiday, we are going to see thinner liquidity in the market for the rest of the week, which may exacerbate some market moves. The positive lead from Wall Street should see Asian markets moving higher, with energy and resource sectors likely to benefit from the overnight moves higher in metals and commodities markets.
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With the Fed content to frame rising US treasury yields as an echo of economic optimism, bond markets take a breather while oil prices have blown off course