Market wrap:Trump threateneds to shut down the government - Westpac

Analysts at Westpac offered their Market Wrap.

Key Quotes:

"Global market sentiment: A more risk averse mood followed Trump’s latest comments in Phoenix; US equities, bond yields, and the dollar all lower.

Trump threatened to shut down the government to build the wall, and jettison NAFTA. Fitch warned that the US’ AAA rating would be reviewed if the debt ceiling is not raised.

Interest rates: US 10yr treasury yields fell from 2.22% to 2.17%, 2yr yields from 1.33% to 1.31%. Fed fund futures yields continued to price the chance of a December rate hike at around 36%.

Currencies: The US dollar index is down 0.4% on the day. EUR rose from 1.1740 to 1.1823. USD/JPY fell from 109.80 to 108.96, the safe-haven yen one of the top performers on the day. AUD only rose slightly, from 0.7882 to 0.7913. NZD underperformed again, amid looming election uncertainty, extending a two-day old decline to 0.7198 – a six-week low. AUD/NZD thus extended its multi-week rally to 1.0959 – the highest since March.

Economic Wrap

US new home sales fell 9.4% in August (vs 0.0% expected), although the previous three months were revised much higher to leave a positive trend intact. Manufacturing PMI (Markit) fell from 53.3 to 52.5 (vs 53.5 expected), although services PMI rose from 54.7 to 56.9.

Fed member Kaplan repeated his expectation that balance sheet shrinkage would begin soon, as well as his call for patience on rate hikes pending inflation updates."