Axi | May 31, 2018 10:36
Originally published by AxiTrader h2 Market Summary (7.37 am Thursday, May 31)/h2
What a difference a day makes.
My hypothesis that the players in the Italian political turmoil got the shock of their lives from the market’s reaction to their posturing and the turmoil that ensued has proved correct – at least over the past 24 hours. Positions have been walked back, clarifications made, emotions calmed, and negotiations on a political government seem to have restarted.
That means Italy may not be headed for a summer election. And that means the EU may not face a referendum on its future.
Phew, storm in a teacup, nothing to see here move along, please. At least that’s the take markets appear to gone with last night.
Stocks in the US recouped the loses from the previous day with the S&P 500 up 1.26% to 2,724, the euro has gained a little more than a per cent to 1.1660, in Milan the FTSE MIB is up 2.09%, while Italian 10-year bonds rallied 22 points to 2.96%.
That better tone was aided by the news OPEC may not be in any rush to raise output at the June meeting. Taking a leaf out of the Fed’s playbook sources have told Reuters any movement in production caps will be “in a gradual and deliberate fashion” to offset any supply shortage with the source adding “the group is not ready yet to lift full controls”.
Naturally that saw a response with WTI up 2.44% while Brent rose a little over 3%.
And thus we have Italy and oil driving a better night for risk assets. Indeed the Dow rallied more than 300 points to close at 24,667, the Nasdaq 100 lifted 0.72% to 6,976 while in Europe the DAX rose close to 1% while the FTSE was up 0.75% and the CAC in Paris dipped 0.2%. And of course that’s lifted the SPI sharply higher with prices up 41 points suggesting a much better day ahead for the ASX 200.
Inflation data out of Germany has put the ECB back in play with state results easily higher than forecast while the German national inflation rate of 2.2% was well north of the 1.8% the market expected. And this combination of an ECB which might be in play and some relief over Italy was behind the move in the euro’s move. The pound is up just 0.23% at 1.3282 while USD/JPY at 108.95 is only up 0.15%.
That USD/JPY move might suggest the Aussie dollar had a quiet night. But the relief rally and lift in risk appetite has seen the AUD/USD power around 1% higher to 0.7578 this morning. The kiwi did even better up 1.25% to 0.6988 while the Ccanadian dollar also loved the risk and commodity rally with USD/CAD down 1.08%. That move is interesting in the context of a hawkish hold from the BoC overnight.
Besides the move in oil base metals had a good day yesterday with nickel, tin, and lead up more than 1%. But copper lagged with a 0.2% move to $3.06 a pound. Interestingly for my other hypothesis that Bitcoin is the anti-establishment hedge it fell 2.3% last night as risk caught a bid and Italy settled down. Gold is still very quiet at $1301.
And finally, there doesn’t seem to have been any fallout from the latest move by the US administration to impose tariffs on China. These were re-announced yesterday morning amid the Italian turmoil and even though the Chinese hit back with some belligerent comments markets are not concerned. Also worth noting was that US Q1 GDP was knocked back to 2.2% on consumer spending while the Beige Book suggested wage and price pressures are moderate in most districts and consumer spending was soft. Watch THAT space folks but the Fed seems on track for a June hike.
To the day ahead then and here at home we get the release of Private CapEx report which will feed into GDP. The market is looking for an increase of 1%. The Chinese official PMI’s are out as well. Tonight the EU CPI is out along with unemployment. Canada releases Q1 GDP while in the US core PCE prices are out along with personal incomes and pending home sales.
h2 Here's What I Picked Up (with a little more detail and a few charts)/h2 h2 International/h2read more at CNBC here because, you know, there are still risks like oil and trade you need to think about too. h2 Australia/h2
Have a great day's trading.
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