Originally published by Rivkin Securities
Another mild night of trading resulted in little change across major US and European markets, with Germany’s DAX one of the bigger movers that shed 1.25%. Germany’s ZEW economic survey came in lower than expected, which pulled markets back there and seemed to hand New York a poor lead; however, significantly lower CPI in the UK (2.6% versus 2.9% forecast) didn’t put much of a ding in markets there and as a result US markets quickly shrugged off the European lead and finished around where they closed after the previous session.
Disagreement among policy-makers over healthcare reforms in the US is being blamed for continued US dollar weakness, but as I said yesterday this is about as good a result as we can hope for – the US dollar is now around 8% weaker for the calendar year and this is great news for emerging Asia. Asia raises funds in US dollar, it pegs currencies to US dollars and a stronger US dollar simply works against the flow of money in our region of the world, so a weaker US dollar is good news – whether markets do or not, they should celebrate the weaker US dollar.
Once again, precious metals showed strength yesterday, while copper and iron ore prices remained steady. The combination of strengthening commodity markets and US dollar weakness has sent the AUD/USD above US$0.79 and, again, I would highlight the fact that this (conveniently for equity investors) will help hold RBA cash rates where they are, given any rate rise would give the Australian dollar an unwanted tailwind. S&P/ASX 200 futures are down 5 points – consider this a symptom of local investors being in a holding pattern until they figure out what a stronger Australian dollar means for them.
There is little high-impact data out today, just a few low-level releases as follows, all AEST:
- Wednesday 10:30 Westpac lending survey
- Wednesday 21:00 US Mortgage applications
- Wednesday 22:30 US housing starts & building permits