Originally published by Rivkin Securities
The Dow Jones Industrial Average closed down slightly overnight despite a valiant effort to get back to unchanged in the last hour of trading. The 0.17% decline appeared to be driven by concerns about increasingly aggressive rhetoric between the United States and North Korea but given the long run of up days the market was probably ready for a pullback. Gold was a major beneficiary of the tensions around North Korea, climbing around US$10 and pushing the price to a two-month high. Australian gold stocks would be expected to rally today based on the jump in gold price with a gradually weakening Australian dollar further helping local gold producers.
Oil inventory data from the Department of Energy (DoE) was released last night showing a further draw in crude inventories. This continues the downtrend in inventories that has been in place for several months now although prices are reacting very cautiously to the inventory declines. WTI oil is hovering just below US$50 per barrel and made only modest gains following the release of the DoE data. A continuation of inventory drawdowns at the pace we have seen recently may eventually catch the market by surprise as inventories move towards more normal levels while oil prices stay stuck at relatively low levels. The pace of the drawdowns indicate that the OPEC production cuts are now having a noticeable effect on the market.
The S&P/ASX 200 continues its sideways dance, almost alternating between up and down days and failing to break out of a narrow trading range. Futures are pointing to a slightly higher open this morning although realistically it could go either way. The leads from the US overnight were negative although the rallies in the major indices in the late part of the session may provide the impetus for a positive close today. Earnings season continues with AMP releasing its half year results this morning.
Data Releases:
- UK Manufacturing Production 6:30pm AEST
- US PPI 10:30pm AEST