Aussie, bond yields slide, iron ore pops


Doubts are building about the prospect of a US-China trade deal. Again, it would seem that the countries negotiators are hitting a few roadblocks, apparently around the matter of US agricultural purchases, and forced technology transfers. Several headlines in the last 24 hours attest to the challenges and that’s seen safe-haven assets generally climb. 

The trade war wasn’t the biggest issue yesterday, though. A spate of economic data was released across the globe and the net effect was renewed concern about the strength of the global economy. Chinese data missed expectations considerably with softness in industrial production and fixed asset investment pointing to constrained investment in China’s economy. Japanese GDP also missed expectations.

German GDP data did surprise to the upside, and defied expectations that the German economy entered technical recession last quarter. But the impact of that was, counterintuitively, negative for European equities as it lowers the chances of German fiscal stimulus.

This combination of growing doubts about trade talks, along with disappointing economic data, delivered something of an anti-risk feel to trade. Global bond yields retraced considerably: the yield on the benchmark US 10-year treasury note fell 6 basis points.

Lower global bond yields pushed gold prices 0.5 per cent higher, and off recent lows. The Japanese yen lead the G10 currency space’s gains, and the Aussie and Kiwi dollar’s lagged. Oil and copper prices dropped on fresh concerns about global growth, however iron ore prices actually rose, likely on bets that weak Chinese economic will see the country’s policymakers increase economic stimulus.


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