After reaching new all-time highs on Friday, U.S. equity markets paused on Monday in a quiet night for data releases. Both the S&P 500 & Nasdaq 100were modestly lower, down -0.09% & -0.14% respectively while the U.S. Dollar index gained +0.15%. The first chart below highlights the U.S. Dollar index which is now strengthening following the better than expected non-farm payrolls data on Friday with the probability of a hike by the Federal Reserve by the end of 2016 beginning to creep higher.
Commodity prices were generally stronger overnight led by gains in oil following comments from OPEC President Mohammed bin Saleh Al-Sada that OPEC was in “constant deliberations” on market stabilization while forecasting that the current bear market will be short. The group will hold informal talks at a meeting in Algiers next month prompting speculation around production freezes which failed earlier this year. While this will be supportive of prices in the near-term it’s certainly too soon to be jumping on-board with this idea, we’ve seen OPEC and non-OPEC nations fail to reach agreements for output freezes previously and there are no clear indications this will change anytime soon.
The second chart below highlights both WTI & Brent crude oil which gained +2.92% & +2.08% following the news and this had a positive effect on commodity prices. Copper gained +0.51% as did iron ore futures up +1.33% while natural gas slipped -0.87%. A stronger U.S. Dollar keep spot gold prices unchanged while spot silver managed to close +0.26% higher.
European equity markets were higher across the board with the DAX +0.63% higher following German Industrial Production (YoY Jun) which met expectations of a 0.5% gain. The Euro Stoxx 600 finished flat, up just +0.04% along with the Euro which was little changed up just +0.02%. Meanwhile the FTSE100 was boosted higher +0.23% by a Pound which declined -0.22%. Elsewhere the Euro-zone Sentix Investor Confidence survey for August increased to 4.2 from 1.7 a month early, surpassing expectations of 3.0.
Recently supporting commodity prices along with an improving risk appetite from the global economy is the expected or actual easing from central banks. The prospect that monetary policy will continue to remain very accommodative is unlikely to go away anytime soon with the global growth and inflation remaining weak. This will continue to be supportive of commodity prices and this will certainly benefit Australia, although likely at the expense of a stronger Australian dollar.
ANZ Banking Group (AX:ANZ) kicked off earnings for Australia’s major lenders this morning announcing profit excluding one-time items to $5.2 billion, down 3% from $5.4 billion year prior. This comes following an announcement yesterday that it may need to raise further capital following regulatory changes to the treatment of residential mortgages lowering dividend expectations. We'll need to wait and see how the stock opens this morning and given the highly correlated nature of the big four banks this may weigh on sentiment across the remaining lenders, Commonwealth Bank Of Australia. (AX:CBA), National Australia Bank Ltd (AX:NAB) and Westpac Banking Corporation (AX:WBC).
The S&P/ASX 200 finished +0.7% higher on Monday along with the Australia dollar which gained +0.49%, meanwhile the market is set for a modestly stronger open this morning with ASX SPI200 futures up a further 11 points in overnight trading.
Data releases:
- Australian NAB Business Confidence (MoM Jul) 11:30am AEST
- Chinese CPI & PPI (YoY Jul) 11:30am AEST %0