Axi | Apr 19, 2018 09:26
Originally published by AxiTrader
Welcome to my daily Markets Musings.
So I realised last night it was 30 years ago yesterday that I walked into the old Westpac dealing room at 60 Martin Place as a Retail Dealer on the Money Market Desk. What a journey it has been since then. Maybe time for a little rest and reflection.
Feedback always welcome
Greg
h2 Market Summary (7.43 am Thursday April 19)/h2Oil is through the roof this morning with both Brent and WTI up more than 3% to $73.12 and $68.78 respectively. It’s a combination of inventory draws, geopolitics, and a little story on Reuters saying the Saudis are actually driving toward $100 a barrel as their next target.
Naturally, that’s had a bit of an impact on bonds with the US 2-year up at 2.43% - NOT A TYPO – and the 10-year at 2.87%. The Fed will certainly need to get busy on the tightening front if the Saudis get their way.
Naturally also, the energy sector has been a powerful driver of overnight moves on global stock markets. But the surge of 1.72% of this sector in the S&P 500, the 1% gain of industrials, and the 0.72% gain in materials has been largely offset elsewhere. That’s left the S&P 500 up just 3 points at 2,709.
Danger Will Robinson.
The Dow dipped 39 points, 0.16%, and the Nasdaq 100 was up 0.31%. In Europe it was a sea of green with the FTSE up 1.26%, but the DAX in Germany was only 0.04% higher while the CAC gained half a percent.
Yesterday China’s stocks rose and the 10-year rate collapsed to 3.6% in the wake of the previous night’s RRR reduction. But some, like me, wonder why the RRR needs a cut if the economy is doing so well. It’s worth contemplating.
Here at home the S&P/ASX 200 rose 20 points yesterday to finish at 5,861. Frankly that was disappointing. But the 24 gain SPI traders have added overnight – reflecting the big moves in energy, industrials, and basic materials offshore no doubt – looks set to take the 200 index above recent resistance. It has to close above 5,871 to remain positive however.
Turning to forex now and both the pound and Canadian dollar came under selling overnight with both currencies down around 0.6% against the US dollar. In the case of sterling, it was the lower than expected inflation prints (0.1% mom v 0.3% exp and 2.5% v 2.7% exp for yoy) which did the damage while in Canada the BoC left rates at 1.25%. And while it upgraded the economic outlook Governor Poloz essentially said he’s going to let the rabbit run (the economy) a little harder before jacking rates again. So this morning GBP/USD is at 1.4206 and USD/CAD is at 1.2626.
Elsewhere for the third day in a row early Europe thumped the Aussie dollar with the kiwi joining in for a bit of fun. Both have recovered from their lows, but where the Aussie is up 0.24% at 0.7784 the kiwi is down around the same amount at 0.7320. The euro is largely unchanged at 1.2377 and USD/JPY is up 0.2% at 107.21.
Besides the rally in crude there were some decent rallies in base metals. Aluminium in Shanghai was up sharply yesterday as was copper. The Dr is up a stunning 2.68% in US trade at $3.1575 a pound. No wonder the Aussie has caught a bid.
There was another big round of central bank speak last night. ECB’s Villeroy worried that trade and the exchange rate may see the ECB change its plans. The Fed’s Beige book was pretty solid but there we’re concerns about the trade and tariff issue while Bill Dudley suggested the neutral rate in the US is up at 3%. He might be on the way out but it’s worth noting the Taylor Rule is currently sitting around 3.4%. Bullard worried about the yield curve and Kaplan said growth will moderate in 2019 and 2020.
On the day ahead we get employment data here in Australia. The Reuters poll says markets are expecting 21,000 jobs and an unemployment rate of 5.5%. before that though we get NZ CPI with the market expecting 0.5% for Q1 2018.
Tonight it’s UK retail sales, more central bankers speaking from the BoE, ECB, and Fed as well as jobless claims and the Philly Fed index.
h2 Here's What I Picked Up (with a little more detail and a few charts)/h2 h2 International/h2h2 Australia/h2
h2 Commodities/h2
Have a great day's trading.
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