The Australian sharemarket is set to open stronger this morning, despite Wall Street posting its fourth straight day of losses, as mining heavyweights BHP and Rio Tinto advanced in US trading.
‘The combination of geopolitical uncertainty, rising interest rates, Fed hawkishness, and inflation frustration have combined to put bears temporarily in charge.’Just a day after Jerome Powell threw cold water on rate-cut bets, dip buyers emerged in the Treasury market, with two-year yields dropping further below 5 per cent and $US13 billion sale of 20-year bonds drawing solid demand. The yield on 10-year Treasuries declined eight basis points to 4.59 per cent.
American depositary receipts of mining giant BHP - the biggest stock on the Australian market - rose 2.6 per cent in US trading, while Rio’s ADRs climbed 1.7 per cent. While this is not necessarily a negative indicator for the stock market, it all depends on the economic cycle. The lower ERP can be seen as a promise of a future boost in corporate profits, but also that a bubble is in the making.