Originally published by Rivkin Securities
Markets had a firm risk-off trend last night as concerns about North Korea linger and FOMC Governor Lael Brainard commented that the Federal Reserve may have to slow the pace of rate hikes given recent weak inflation data. The Dow Jones Industrial Average closed down 1.07% from a steady downtrend that lasted most of the trading session. The typical risk-off moves occurred in almost all asset classes with gold closing near a one year high and bonds being bought.
The Reserve Bank of Australia (RBA) decided to leave rates on hold at its monthly meeting yesterday as weak inflation provides cover for leaving rates at their current record low levels. The RBA governor Philip Lowe is confident that the economy will strengthen and eventually provide wage gains to workers and stoke inflation. The bank again raised some concerns about high property prices in some eastern state cities although they noted that regulatory intervention appears to be taking effect.
WTI oil rallied to $48.62 per barrel after being sold off as a result of Hurricane Harvey. Gasoline prices rose quite sharply during the hurricane but have come down off their highs as refining capacity comes back online. Oil is facing several competing forces at present with the hurricane both reducing crude demand as a result of lower refining capacity while simultaneously reducing supply as a result of shut-ins to Gulf of Mexico production and some onshore production. Furthermore, Libya production has been disrupted recently as a result of internal fighting. This week’s inventory data will be key to judging the impact of the hurricane on the supply/demand balance.
Today Australia’s June quarter GDP is set to be released with growth of 0.8% expected relative to the prior quarter. This would be a significant improvement over the March quarter which saw growth of 0.3%.
Data Releases:
- Australia GDP 11:30am AEST
- US Trade Balance 10:30pm AEST
- Canada Cash Rate 12:00am AEST