Originally published by Rivkin Securities
The Dow Jones and S&P 500 started last night’s session relatively flat but trended down in the latter half closing down 0.46% and 0.81% respectively. Tech stocks were hit particularly hard with the Nasdaq 100 down 1.83%. Several Fed speakers have mentioned over the past two days that they are concerned about excess risk taking in the financial system as a result of the very low rates. This indicates that the Federal Reserve is quite determined to continue on its path of interest rate hikes and it would take a significant weakening in economic data to change its mind. Market expectations are for another hike in either September or December this year.
Industry group API reported its estimate of oil inventories which indicated a surprise crude build as well as a large build in gasoline. Although crude did close down for the session, the move was not as aggressive as some of the down moves over the last month. With fund managers holding near record bearish positions in oil it would take a significant bearish event to push prices lower at this point. The risk to oil prices, therefore, is probably to the upside.
The S&P/ASX 200 managed to recover yesterday to a nearly unchanged result after being down as much as 0.5% early on. Unfortunately futures this morning are pointing to a lower open although only by 0.2%. Materials were the best performing sector yesterday with iron ore producers benefiting from a large rise in the iron ore price. Fortescue Metals (AX:FMG), for example, rose 3.4% yesterday on the back of this price increase. The recovery in iron ore prices over the past two weeks represents a change from the sharp downtrend that has been in place since early March and although the metal has bounced almost 12% in the past nine trading days (to $60 per tonne) it is still well off the February peak of around $95 per tonne.
Tonight we have speeches from BOE Governor Carney, BOJ Governor Kuroda and ECB President Draghi.
Data releases:
- ECB President Draghi speaks 11:30pm AEST
- BOJ Governor Kuroda speaks 11:30pm AEST
- BOE Governor Carney speaks 11:30pm AEST