Possible British exit from EU continues to exert pressure
The rebound in sentiment that started in Asian trade yesterday continued overnight, helped by a lift in oil prices. Shares in Europe and the US rallied, and shrugged of a weak batch of global manufacturing data.
Rising risk appetite helped push US yields higher as investors sold out of safe-haven government debt. Yields on US 10-year notes lifted 2 basis points to 1.76%.
Yields on Australian 3-year bond futures rose 1 basis point to 1.81%, while the 10-year yield rose 2 basis points to 2.47%.
The major mover was GBP, which continued to be under pressure on fears the UK will exit the EU.
It hit to a seven-year low against the US dollar, and weakened against the Australian dollar. "Brexit" concerns also saw the euro weaken.
The Australian dollar benefited from the pickup in risk appetite and the rebound in commodity prices, rising to its highest since early January to trade at around 72.4 US cents this morning.
Oil prices jumped - US crude rose to US$31.71 a barrel on expectations of falling oil production from the US. Prices of other commodities, including copper and zinc, rose helped by the increase in risk appetite.
Gold prices fell as its safe-haven appeal lessened. Iron ore prices climbed to US$51.52 a tonne, the highest since October.
There was no economic data released locally yesterday.
The MNI Business Indicator fell to a reading of 49.9 in February, from 52.3 in January.
The index is back to its November level. The reading below 50 indicates a contraction in business activity in February.
The preliminary reading for the Markit manufacturing PMI fell from 52.3 to 51.0 in February, the lowest in a year and indicating a slowdown in European manufacturing activity.
The Nikkei manufacturing PMI fell to 50.2 in February, from 52.3 in January. The reading remains above 50, indicating Japanese manufacturing activity continues to expand, although at a less rapid pace.
The new orders sub-index dipped below 50, with a reading of 49.9 in February.
The manufacturing PMI published by Markit fell from 52.4 to 51.0 in February, the lowest in six years. Manufacturing is continuing to be hit by the stronger US dollar.
The Chicago Fed National Activity index, based on an average of 85 other indicators, rose from -0.34 to 0.28 in January.