Market wrap: positive data helped boost risk sentiment - Westpac

Analyst's at Westpac Market Wrap...

Key Quotes:

"Global market sentiment: Solid US economic data (ADP, ISM) helped boost risk sentiment. The US dollar, interest rates, and equities are higher, with the S&P500 at a fresh record high.

Interest rates: US 10yr treasury yields rose from 2.21% to 2.24%, currently back at 2.22%. Fed fund futures yields were slightly firmer, now pricing a 14 June rate hike as a 95% chance (approximately).

Currencies: The US dollar index is up 0.3% on the day. EUR fell from 1.1260 to 1.1206. USD/JPY rose from 111.00 to 111.48. Underperformer AUD fell from 0.7420 to 0.7373, weighed down by disappointing CAPEX and China PMI data, as well as ongoing weakness in iron ore prices (down 2% to $56 – an eight-month low). NZD slipped from 0.7085 to 0.7059. AUD/NZD fell from 1.0480 to 1.0436 – a four-month low.

Economic Wrap

US private sector payrolls (ADP) rose 253k in May (vs 180k expected), the services sector adding 205k jobs. Although the relationship is fickle, the strong ADP result adds upside risks to Friday’s non-farm payrolls report. ISM manufacturing rose from 54.8 to 54.9 (vs 54.8 expected). The employment component increased, but price pressures remained subdued. Construction spending fell 1.4% in April (vs +0.5% expected).

FOMC member Powell expected two more hikes this year, and didn’t expect tapering to have much effect on markets. He also thought inflation would resume its rise, but was unsure about fiscal policy."