Originally published by Rivkin Securities
Closing down 0.33% overnight, theDow Jones Industrial Average has now had three losing days in a row, the longest losing streak since the presidential election. Investors may be taking risk off the table ahead of the non-farm payrolls report on Friday and the 6-weekly meeting of the Federal Open Market Committee (FOMC) next week where it is expected interest rates will be hiked by 25 basis points.
Oil suffered overnight, down around 5%, as a huge build in crude inventories sparked strong selling. Crude inventories have increased for the past nine weeks in a row and US production is now at its highest level since March last year. WTI is now trading near the lower end of its recent trading range at a price of $50.20. If WTI breaks through $50 it would be the first break below this level since the announcement of the OPEC cuts in late November last year.
Gold was also down overnight as the prospect of a rate hike by the FOMC is considered negative for gold prices. Interestingly, the Fed is still expected to raise rates despite the Atlanta Fed predicting Q1 GDP to be just 1.2%. Since GDP growth is not part of the Fed’s mandate, they may not give it as much as a weighting as the upcoming non-farm payrolls numbers. The ADP non-farm employment change was released last night, coming in at 298,000, much higher than the 184,000 expected. The ADP is generally seen as a precursor to the official number on Friday although they often vary significantly from each other.
S&P/ASX 200 futures are indicating down 12 points this morning in line with the falls in the US markets overnight. Yesterday the index staged an afternoon recovery to close flat on the day.
Data releases:
· Chinese CPI (YoY) 12:30pm AEDT
· Chinese PPI (YoY) 12:30pm AEDT
· Euro Minimum Bid Rate 11:45pm AEDT