Originally published by Rivkin Securities
The US Dollar Index rebounded on Thursday along with US equity markets and treasury yields as investors looked past political concerns and focused on US economic data. The dollar index gained +0.35% with both the two and 10-year treasury yields rising +2.4 and +1.2 basis points respectively. Both the S&P 500 and Nasdaq 100 recovered some of Wednesday’s declines, rising +0.37% and +0.82% respectively.
The Philadelphia Fed’s manufacturing index (MoM May), which is a regional survey of manufacturing for the mid-Atlantic, rose more than forecast to 38.8 against estimates for 18.5 from a prior reading of 22. The result is a positive sign for the manufacturing sector and overall the US economy with manufacturing accounting for around 12% of GDP. Further data out of the US continued to show a tightening labour market with initial jobless claims for the week ending May 13th coming in below estimates of 240,000 with an actual reading of 232,000. The overall continuing claims for May 6th dropped to 1.898 million from a revised 1.920 million.
Expectations for the FOMC to hike rates when the committee meets on June 14th are currently at 73.8%, well off the recent highs from last week at 83.1% but overall suggests the market is fairly confident about a rate hike.
In the UK the pound declined -0.25% despite a larger than expected pickup in retail sales which rose +2.0% month-on-month for April from -1.2% the month prior. Still following the recent weaker data out of the U.K. market analysts expect this to be short-lived as quickening inflation outpaces wage growth that is expected to weigh on household spending, which accounts for 65% of the UK economy.
The Australian dollar initially rose on Thursday before a stronger dollar pushed the currency down -0.20%. This followed the release of unemployment figures for the month of April which were better than anticipated. 37,400 jobs were added compared with market estimates for only 5,000 which pushed the unemployment rate unexpectedly down to 5.7% from 5.9%. Still this is unlikely to see the RBA look to change their stance on monetary policy in the coming months as record low wage growth of +1.9% and an underemployment rate of 8.6% continue to suggest significant slack remains in the labour market. Current ASX interbank cash rate futures imply the less than even chance of a rate increase until September 2018.
Locally the S&P/ASX 200 index closed -0.82% lower on Thursday and we can expect a fairly flat start to trading this morning with ASX SPI200 futures down just -3 points in overnight trading.
Data releases:
· German Producer Prices (MoM & YoY Apr) 4:00pm AEDT
· Euro-zone Current Account (MoM Mar) 6:00pm AEDT
· Canadian CPI (MoM & YoY Apr) 10;30pm AEDT
· Fed’s Bullard Speaks On Economy 11:15pm AEDT
· Euro-zone Consumer Confidence (MoM May) 12:00am AEDT
· US Baker Hughes Rig Count (May 19th) 3:00am AEDT