Originally published by Rivkin Securities
US stock markets opened down around 0.5% overnight but steadily regained the losses during the session. The Dow Jones Industrial Average closed down 0.2% and the S&P 500 down 0.1%. The market is still unsure of how to take the Trump administration’s failure to pass a new healthcare bill. Expectations are that Trump will now move on to tax reform although no-one at this stage has any concrete information about this. Although the market doesn’t seem concerned at the moment, there is also the potential for a government shutdown at the end of April if the republicans and democrats can’t come to some agreement about raising the debt ceiling.
Gold rallied throughout the Asian and European sessions yesterday but dropped sharply around the open of the US session. Despite the fall, the gold price is back up near one month highs, having rallied despite the hike in US interest rates earlier this month. Bond prices continue to bounce off their lows, pushing yields back down, partly due to a short squeeze in US treasuries. The falling yields should take some of the pressure off banks to continue raising mortgage rates although rising funding costs as a result of stronger regulation will continue to play a role.
The oil price remains near multi month lows despite a small rise overnight. Some OPEC members have expressed a willingness to extend the production cuts beyond the currently agreed June end date. US inventories have continued to climb despite the cuts having been in effect for almost three months now. Compliance by OPEC members is at 94%, an unusually high figure given that there is often a lot of cheating regarding production quotas.
Locally, S&P/ASX 200 futures are pointing to a slightly higher open after a slightly lower close yesterday. A large block trade in Myer (MYR) yesterday has market watchers speculating who the buyer is and why they are buying. The current theory is that billionaire Solomon Lew may have bought the stake and may be preparing for a takeover of MYR where Lew’s Premier Investments (PMV) would be the buyer.
Data releases:
· FOMC Member Kaplan Speaks 9:30am AEDT