It could have been bigger
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Why did bond yields fall sharply after the RBA’s rate cut?
Well, NAB has been saying a 50 basis point cut could have happened, but it didn't. But expectations were fairly broad. Some expected no cut at all yesterday. So when Michelle Bullock said 25 basis points wasn't a slam dunk, and they did talk about a 50 basis point cut, that's why the market reacted the way it did, with a sizable fall in bond yields, but they have been lower. And US equities have broken their run quite sizable falls there today. Inflation wise, well Canada was an upside surprise. The UK inflation is expected to rise quite a bit to do as well as today as well because lots of things went up in April. But nothing extraordinary from Donald Trump today except pushing to get his beautiful build-through.
So markets haven't been having too much to react to there. It's Wednesday, it's the 21st of May 2025. It's the morning call from NAB. Good morning. Well, the US dollar is down 0.4% this morning on the DXY, just over one hundred now. The Aussie is also down, losing 0.6%, down to sixty-four point two US cents. The winners are the Swiss franc. That's up naught point six percent, the euro up naught point four percent, the pound up naught point two percent. US stocks much lower. So much for the bull run, a naught point four percent drop in the S P and the Nasdaq. Not point three percent lower for the Dow. There was a bit of a a run towards the close, but not enough to keep them out of the red. But in Europe, shares up not point six percent for the Eurostocks fifty, not point nine percent for the FTSE one hundred.
Looking good elsewhere in Europe as well. Bond yields are a little higher, four basis points added to ten year treasuries, up to four point four eight percent, up two basis points in Germany, four for ten year Gilts in the UK. Aussie ten year yields yesterday were down. 13 basis points after the RBA, uh down to four point four percent. Today, uh futures climbing back a few basis points uh from that. And small movements in oil, WTI is down 0.2%, Brent is up a quarter percent at sixty-five eighty a barrel now. So uh the end of the winning run for the S P uh and the share markets generally in the United States. Here's an Absaldy old. So the SP
How did US stock indices react to the end of the bull run?
He didn't quite make twenty percent from those lows in April. Tech stocks really taking a hammering. So look at this, Google down almost two percent, Nvidia down one point six percent, the same for Apple, Microsoft naught point seven percent lower, but also Walmart down naught point seven percent as well today. So it's not just tech. So uh a lot less enthusiasm, it's fair to say.
Yeah, good morning Phil. So I think uh, you know, maybe just a little bit of a reality check. We did see a really strong rally in US equities uh after that announcement of a an agreement and a ninety day sort of pause between the US and and China. Uh but that did take equity markets you know back to, you know, again what were quite elevated and quite expensive valuations um that just seemed to be a little bit out of whack. with I suppose, you know, the impending economic reality in the US. And so I guess, uh, you know, after what was a pretty impressive rebound, as you said, a little bit short of twenty percent, you know, ma maybe uh investors are just sort of taking a an opportunity to to reassess and uh think perhaps a little bit more deeply what what might lie ahead, especially because, you know, that deadline of the ninth of July, which was the
initial ninety day pause um is is starting to encroach a little bit. We're, you know, close to s to only six weeks away from that. And I guess the market is probably going to start to question, well, where are we sitting? Because we've got an agreement with the US and China uh that lasts for ninety days and we've got an agreement with the US and the UK, but that's sort of it. Um So probably not surprising that, you know, markets are uh have have run into a bit of a ceiling.
Yeah. Except for Tesla, because Elon Musk has said that he's going to be CEO there for the next five years and he's cut back on his political spending so he can concentrate on business.
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Chapters
8 chapters
1
Why did bond yields fall sharply after the RBA’s rate cut?
0:01–2:04
2
How did US stock indices react to the end of the bull run?
2:04–5:48
3
What caused the Australian dollar to drop while the Swiss franc rose?
5:48–10:42
4
Why are Japanese long‑term bond yields climbing and what does the weak auction indicate?
10:42–13:40
5
How might the RBA’s dovish stance affect future cash‑rate cuts?
13:40–15:57
6
What are the implications of the US‑China trade pause on global equity markets?
15:57–17:41
7
How could differing inflation paths in the US, Europe and Australia shape rate differentials?
17:41–17:58
8
What are the key takeaways from the morning call and outlook for the next meeting?
17:58–17:59