Oil collapsed again even though stocks didn't build as expected. That's the sign of a bear market. Stocks slipped after that, the Aussie dollar pulled back from 75 cents and the signs of a paradigm shift in markets were front and centre once again.
Stocks dropped, oil collapsed, the Aussie dollar fell under 75 cents and investors retreated to the sidelines amid a general air of risk aversion.
Why? Because bond rates rising could be the paradigm shift that alters the way markets have been working these past few years.
In the current mood there was always a risk of a reversal of Friday’s moves if Lael Brainard stayed true to her dovish credentials. That she did helped stocks and the Aussie rally. But the fact that bonds and USDJPY didn’t really join the move suggests there is more than the Fed at play right now.
Stocks were lower, the dollar a little stronger and bonds higher as traders turned cautious that the consistent fed warnings that now is the time for a rate hike might actually be followed up. That's knocked the Aussie back to an important support zone and puts the SPI 200 under further pressure.
The Aussie dollar fell heavily from the supply zone above 77 cents overnight after the US dollar regained its footing and a turn in bonds permeated markets.
The US dollar found support both from a 4 month trendline and comments by Fed presidents lacker and George suggesting that September might still be on the table. That knocked the Aussie back from 77 cents as traders await trade data for Australia and China today.
The US dollar collapsed after the weakest ISM services data in 5 years fundamentally undermined expectations of a Fed hike at the September meeting.
That saw the Aussie dollar and gold, amongst others, rocket higher. Stocks and bonds also rallied as a result.
Oil was the main focus overnight as traders recognised the noise coming from the Saudis and Russians mean an agreement to work together is on the table. Not yet though which is why much of the rally was reversed.
US non-farm payrolls were weaker than expected but not enough to definitively rule out a Fed rate rise in September. That, comments from Fed president Lacker, and an upgrade to expectations of Q3 US growth to 3.5% saw the US dollar recover.