Originally published by Rivkin Securities
The euro gained +0.99% against the dollar on Tuesday following a better than anticipated trade surplus and GDP growth that was in line with expectations. Month-on-month for March to trade balance rose to a surplus of 30.9 billion Euros (not seasonally adjusted) compared with a prior reading of 17.8 billion and estimates for 25.8 billion. Meanwhile the Euro-zone economy expanded at +1.7% year-on-year for the first quarter of 2017 in line with market estimates. Equity markets were mixed, with both the Euro STOXX 600 and DAX down just -0.02%, Spain’s IBEX 35 up +0.22% and France’s CAC 40 down -0.21%. Tonight Euro-zone inflation data will be released at 7:00pm AEDT.
British equities rallied to a new all-time high with the FTSE 100 gaining +0.91% to close at 7,522.03 while the more domestic focused FTSE 250 index rose +0.63% to close within one point of its record. This occurred despite inflation data which rose more than expected, year-on-year headline prices rose +2.7% from +2.3% topping estimates for +2.6% while a core measure also gained more than anticipated, rising +2.4% from +1.8% against forecasts for +2.3%. Producer prices, which are a forward indicator for future inflation also rose more than anticipated, rose +3.6% compared with estimates for a +3.4% gain. Tonight we’ll get a look at the unemployment rate due out at 6:30pm AEDT.
The US Dollar Index dropped -0.73% overnight, weighed on as housing data disappointed with new housing starts (MoM Apr) decreasing -2.6% compared with estimates for +3.7% growth and building permits for the same period decreased -2.5% against forecasts for a +0.2% gain. The first chart below shows the U.S. dollar index futures which have now given back the post-election gains as optimism about Trump’s and the Republican party’s ability to push ahead with tax reform and fiscal spending have diminished.
While these measures would further improve the U.S. economy, they are not essential to its success. Forecasts are for a speedy rebound in Q2 GDP following the seasonally weaker growth in Q1, unemployment is sitting at 4.4%, inflation is well on it’s way to the FOMC’s target of 2% and US companies are reporting very healthy earnings growth of 14.8% growth for Q1 for S&P500 companies.
Locally the S&P/ASX 200 index closed up +12.12 points or +0.21% at 5,850.52 with the key support level shown on the second chart below between 5,827 and 5,800, marked by prior highs and lows over the past five months as well as the 50-day moving average has once again held. This morning we can expect a flat start to trade, with ASX SPI200 futures up just +1 point in overnight trading. Importantly we’ll also see wage growth figures due out at 11:30am with forecasts for growth to remain at the record low +1.9%.
Data releases:
· Australian Westpac Consumer Confidence (MoM May) 10:30am AEDT
· Australian Wage Cost Index (QoQ & YoY Q1) 11:30am AEDT
· UK Unemployment And Average Weekly Earnings (3M/YoY Mar) 6:30pm AEDT
· Euro-zone Inflation (MoM & YoY Apr) 7:00pm AEDT
· US Crude Oil Inventories (May 12th) 12:30am AEDT
Chart 1 – US Dollar Index Futures
Chart 2 – ASX200 Index
Source: Rivkin, RivkinTrader