Commodity prices continue to surge, led by energy and agriculture

It was clearly a bearish night’s trade for global markets, but what wasn’t so clear was the matter of why. Stocks were down globally, paced by a little rout in US tech-stocks, as the US Tech 100 shed 1.88% and the US 500 dropped 0.67%, with volumes flowing through the US stock market as heavy as they’d been in over 7-weeks.

Talk of inflation-risks prevailed again

However the apparent turn in sentiment pushed global yields lower, especially amongst European sovereigns, while the US ten year yield dropped back below 1.60%. The play into safe-assets boosted the US dollar, which continued its mini-revival, rallying across the board, and pushing the EUR/USD briefly below the 1.20-handle, and the AUD/USD into the low-0.7700s.

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Of course, the post-hoc news machine that is Wall Street’s financial media went into overdrive attempting to explain the market’s shift into risk-off mode. First it was Chinese military aggression towards Taiwan. Next it was some dour profit guidance from automaker Ferrari as it handed down results. A fat finger error was also proposed.

But it was comments about the potential need for rate hikes in response if US fiscal stimulus overheats the US economy from US Treasury Secretary Janet Yellen that was settled upon as the most satisfactory explanation by the end of trade -- and to be fair, much of the US dollar’s pop did come on that move, though broader inflation fears barely manifested in bond markets.

Ultimately, it might be best said it was one of those sessions that defied total explanation, and that there may have been largely technical elements behind the moves – a stock to bond rotation, a reversal in momentum, profit taking in tech post-earnings season, or any other number of dynamics that prompted the shift in price action.

Despite the overall move out of risk in forex, bonds and stocks, commodity prices continued to surge, adding weight to the inflationist argument in global markets.

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The Bloomberg Commodity Price Index edged higher at its highest level since 2015

The move came mostly courtesy of another push higher in oil prices, with crude closing in once again on its post-pandemic highs, while industrial and industrial metals were mixed, at best. But agricultural commodities extended their parabolic rise, hitting fresh nine year highs, while lumber’s astronomical ascent also continued unabated.

Coming into the Asian trading day, and it’s shaping as a bearish one for Asian stocks, as the region’s indices look poised to wear the brunt of the turn in sentiment in last night’s trade.

The Australia 200 is looking at a 0.37% dip according to SPI Futures. It’s a relatively light data docket today, with market action likely to be impact by Japanese and Chinese markets offline for holidays.

The key release will be this morning’s New Zealand labour market figures, which is expected to reveal the Kiwi unemployment rate held steady at 4.9% last month.

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