Market wrap: risk sentiment soured overnight - Westpac

Analysts at Westpac offered a market and economic wrap for the US session.

Key Quotes:

"Global market sentiment: Risk sentiment soured overnight, benefitting safe havens such as US treasuries and the yen. The S&P500 is down 1.1%, influenced by concerns about the US administration plus a terrorist attack in Barcelona.

Interest rates: US 10yr treasury yields fell from 2.24% to 2.19%, 2yr yields from 1.34% to 1.30%. Fed fund futures yields slipped, pricing the chance of a December rate hike at around 40% (from 43%).

Currencies: The US dollar index is up 0.1% on the day, initially recovering from the previous day’s fall but then falling again after the US stock markets opened. EUR initially fell from 1.1780 to 1.1662 but bounced to 1.1754 in NY. USD/JPY fell from 110.30 to 109.60, the yen outperforming. AUD fell from 0.7963 to 0.7901. NZD fell from 0.7334 to 0.7289. AUD/NZD fell from 1.0880 to 1.0827.

Economic Wrap

US industrial production grew 0.2% in July (vs 0.3% expected). Motor vehicle output fell 3.6% as plants shut down for retooling. Manufacturing surveys remain strong, though, indicating solid activity for the months ahead.

Fedspeakers were Kaplan, who favoured patience regarding rate hikes until inflation progress is seen, and Kashkari, who wanted to consider debt ceiling negotiations when deciding the start of tapering."