Market wrap: rebounds in risk sentiment - Westpac

Analysts at Westpac offered a Market Wrap.

Key Quotes:

"Global market sentiment: Rebounds in risk sentiment in Asia reversed in Europe. Although stocks stabilised in US trading (DAX -0.31%, S&P +0.40%), the weight of fines for VW added to concerns over German banks (at one stage Deutsche Bank and Commerzbank were down -3%) hit confidence.

Iran doesn’t seem to play ball with OPEC on production caps and oil fell back (WTI -3.4% to USD44.35/bbl).

Interest rates: European concerns dragged US 10yr yields back below (now 1.56%). 10yr Bunds yields (down -2.5bp to -0.14%) are now below their August lows and the majority of Bunds are again ineligible (sub -40bps) for ECB’s APP. EU 10yr spreads are wider, but off worst levels (Italian +2bps and Portugal +3bps) and EUR FX basis swaps are increasing the cost of the end of quarter turn. German NordLB pulled its 7yr EUR note issue (Lufthansa pulled yesterday) and Korean Air pulled its USD bond (for EU market) on market concerns.

Currencies: The US dollar index is marginally firmer and within recent ranges, but this belies earlier risk-on moves. USD/JPY faltered at 101.00 and slid towards its pre-debate lows (100.35, range 100.09 to 100.99), EUR/USD has pulled back from 1.1260 high to 1.1205 (low 1.1191). AUD and NZD were capped at key levels (0.7700 and 0.7330 respectively) before slipping to mid-range (AUD at 0.7655, range 0.7612 to 0.7696, NZD 0.7295, range 0.7260 to 0.7331). AUD/NZD appeared to be pinned around 1.0500."