Stocks struggle for direction, AUD rises after suprising hawkish hike

• Treasury yields edge higher; 10-year rises 2.3bps to 3.706%
• Apple momentum stalls on skepticism with $3,499 headset
• VIX touches lowest level since 2021

Stocks

After a valiant attempt at entering a bull market, stocks are wavering as Wall Street contemplates how much more tightening will we see by the Fed. ​ Providing some support for equities was news that Secretary of State Blinken is expected to make a visit to China and meet with key officials. ​ Any progress in cooling tensions with the world’s two largest economies is a positive for risk appetite. ​

RBA

After seeing what happened with Australia overnight, investors are realizing that a Fed skip could really mean a brief hold followed by more rate hikes and not just the ‘one and done’ many are planning on. ​ The RBA held rates steady in April and many thought cooling inflation and weaker growth prospects would allow the bank to deliver one last rate hike after skipping. ​ Fast forward to June and it looks like Australia will have 4 rate hikes since the April hold. ​

The Australian dollar is rallying after the RBA surprised most analysts and the rally could accelerate whenever we see China release stimulus measures. ​

Oil

Crude prices are heavy as global growth concerns continue to suggest a much weaker crude demand outlook. ​ China is scrambling to deliver a ‘basket of support measures’ and Germany factory orders were unable to rebound. ​ It seems the Saudi-led OPEC+ production cut only deterred short-sellers for a couple of days.

The writing is on the wall that China will become more accommodative and the resilience of the US economy should suggest oil demand will stabilize soon, which means the move to $80 crude might take a while longer to unfold.

Gold

Gold prices are wavering as investors await to see what will happen with the recent stock market rally and if the disinflation process will allow the Fed to skip a rate hike next week. ​ Demand for safe-havens have somewhat eased up and traders are waiting to see if the next market risk triggers a de-risking moment.

The RBA rate decision has some investors nervous that the Fed might not be done after a July rate hike. ​ The RBA reminded investors that inflation might prove to be trickier to tackle and if global tightening isn’t quite yet near the end that would weigh on non-interest bearing gold. ​ ​

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