Originally published by Rivkin Securities
Stock markets fell overnight as the Dow Jones Industrial Average had its first 1%+ fall since October last year. The S&P 500 closed down 1.24% while the Dow was down 1.14%. According to the media, the catalyst was fears over whether Trump will get enough votes to repeal Obamacare and the possibility of delays over his proposed tax and banking reforms. A case could be made, however, that the market was ready for a pull-back and it just needed an excuse. The Dow had been trading in a narrow range just below 21,000 and not far from the all-time high of 21,115 reached on 1 March.
WTI Oil had a volatile session, initially climbing but subsequently falling after the release of US inventory data showed further builds in crude stockpiles. Crude has now fallen over $6 per barrel since the beginning of this month. Ironically, Saudi Arabia, which worked very hard to broker a deal amongst OPEC and some non-OPEC countries to cut production, may not be sticking to its allocated production level, having increased February output by 263,000 barrels per day. The cartel will be meeting again soon to decide whether to extend the production cuts beyond the initial six-month term. The US Dollar, which is normally negatively correlated with moves in oil and stocks, also fell, dropping below 100. The 100 level had provided support on two prior occasions, in May of 2016 and January this year and a break below could therefore mean further downside.
Gold and bonds were really the only winners overnight, with gold climbing 0.9%, now up around 3.5% since the March rate hike. Gold benefited from the risk-off sentiment as well as the possibility that future rate hikes may be delayed if Trump isn’t able to implement his stimulatory policies in a timely manner.
Locally, S&P/ASX 200 futures are pointing to a 0.8% fall on the open today, following the US markets down.
Data releases:
· No significant data releases