Originally published by Rivkin Securities
Although the major US indices rallied in the early part of last night’s trading session, the second half was relatively weak which saw both the Dow Jones Industrial Average and S&P 500 close around 0.1% higher. The US market is becoming more focused on who might replace Janet Yellen (or whether she will be reinstated for another term) as the Chair of the Federal Reserve. The implications of who is chosen are quite important as it will likely affect the course of monetary policy with potential candidates having widely differing views about the appropriate course for monetary policy. Under the current path, markets expect another US interest rate hike in December.
The S&P/ASX 200 had a weak day yesterday, falling 0.8% with no obvious catalyst. The disconnect between the Australian and US markets is as pronounced as ever with US indices breaking record highs while the ASX is negative year to date. The last four months have seen the ASX enter a very narrow trading range from which it still hasn’t broken out of. The S&P/ASX 100 over this period has been essentially flat however looking at the individual stock shows a large discrepancy in performance over this time. The best performing stock, Flight Centre (AX:FLT) is up 27% since June while the worst performer, QBE Insurance (AX:QBE) is down 26%. The chart below shows the returns of all stocks in the ASX 100 since June to highlight this discrepancy.
Chart: Percentage Return of ASX 100 Stocks since June 2017
Today we get Australian retail sales data for the month of August which is expected to have risen 0.3%. Although the July number was flat the past four months have been relatively strong for retail sales even as retail stocks are being sold on fears of what the arrival of Amazon (NASDAQ:AMZN) will mean for the sector. The trade balance for August will also be released, with analysts expecting a surplus of almost $0.9bn. This would be almost twice as much as the prior month’s surplus and would continue a string of surpluses that has now been running all year.
Data Releases:
- Australia Retail Sales 11:30am AEDT
- Australian Trade Balance 11:30am AEDT
- US Trade Balance 11:30pm AEDT