Originally published by Rivkin Securities
The US equity markets closed flat overnight, with the Dow Jones Industrial Average closing up just 2 points (0.01%) and the S&P 500 up 0.07%. After reaching all-time highs in early March, both the Dow and S&P 500 have been drifting lower with relatively low volatility. The markets appear to be cautiously optimistic about the tax and spending plans of the Trump administration despite firm details of these plans not being released.
WTI oil has now recovered all of the losses it suffered in early March as a result of the unexpectedly large build in inventories (despite the OPEC production cuts) and is now back at $53 per barrel. The oil market was initially concerned that the cuts wouldn’t be enough to curb the excess supply and rebalance the market however those concerns appear to have faded considering the rally in oil over the past two weeks. At this stage, OPEC seems likely to extend the cuts for another six months after the current round of cuts expire in June.
While the strikes in Syria last week sent gold surging higher, it has now returned to its former level where it appears to be consolidating around the $1,250 per ounce level. The expected drop in the price of gold as a result of interest rate hikes in the US hasn’t materialised so far. As a forward looking market, the gold price may be suggesting that the path of rate hikes won't be as rapid as expected.
The S&P/ASX 200 has been performing remarkably well over the last month. It is outperforming US equity markets and is approaching the 6,000 level once again. This decoupling from the US market is somewhat unusual. The 6,000 level hasn’t been breached at any time since the financial crisis ten years ago and getting through could be a significant milestone considering that it provided strong resistance in March 2015. At this time the index came very close to breaking through but bounced off and retreated for the next several months. Later in the week, Australia’s employment data will be released for the month of March. This data is used by the RBA to help decide the path of interest rates.
Data releases:
· UK CPI (YoY Mar) 06:30pm AEDT