St George Economics economy and finance update
Trading was quiet in markets last night with the UK and US on holiday.
Sentiment generally continued to be weighed down by events last week, although a report that the European Commission was considering a softening of deficit rules may have helped support European shares.
The Euro Stoxx gained 1.1%.
Shares were generally weaker in Asian trade yesterday led by a sharp 3.2% drop in the Nikkei following comments from the BoJ governor (see below for details). Meanwhile, the ASX200 lost 0.5% yesterday.
Australian bonds were stronger yesterday (yields fell), with sentiment still fragile.
Last night, yields on German bunds rose following an improvement in risk appetite. Demand for Italian and Spanish bonds partially recovered. Ten-year bond yields on both declined 9 basis points after jumping last week.
Currencies traded in a narrow range with the US dollar was little changed against most currencies.
The Australian dollar remained close to 0.965 on the continued speculation the Fed would wind back asset purchases.
Brent oil crude futures fell, with weaker economic data last week continuing raise concerns about demand, while gold prices rose.
No domestic data was released yesterday.
Industrial profits for the January to April period increased 11.4% on the same period last year, down from annual growth of 12.1% in the January to March period.
The Bank of Japan (BoJ) Governor has said that interest rates could rise between one and three percentage points in an improving economy (growth and inflation) without causing instability.
US markets were closed for Memorial Day holiday.
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