US markets were closed for President’s Day so there wasn’t a lot of guidance for our market today. On that basis it could be quiet but then again action on British markets suggest otherwise. You see, the big outperformer was the FTSE100, which managed a 1.1 per cent gain overnight. That this was driven by banks and miners bodes well for Aussie stocks – that’s nearly half our index. Stocks in the UK were also reacting to news that property prices surged to a six-year high – up 3.3 per cent in the month of February.
Global equities were otherwise soft with the Dax and CaC off 0.1 per cent. S&P500 futures were up smalls while the SPI was 0.5 per cent higher.
Rates didn’t trade in the US, although 10-year Treasury futures sold off a little. In Europe, the session generally saw bonds rally – Spanish and Italian bonds especially so, with the Italian 10-year down 6 bps to 3.62 per cent as Moody’s raised its outlook on Italy’s credit from negative to stable late last week. The Italian government also issued 1-year Treasury bills at the lowest rate ever last week as well. Elsewhere, moves were small. The German 10-year bond yield was down a bit over 1 bps to 1.68 per cent, while Aussie debt futures were little changed at 96.97 on the threes and 95.895 on the tens.
Forex moves saw the Australian dollar off a bit at 0.9030, or 20 pips lower than at 1630 AEDT yesterday. Otherwise the euro did nothing and is still at 1.3708; the British pound again was the big move, down this time by around 85 pips to 1.6703 after comments from the Bank of England chief defending his decision to abandon economic targets as a guide to economic policy and saying the bank could take its time in hiking rates. The yen is virtually unchanged at 101.9.
Commodities that traded had small moves and so copper was 0.3 per cent high in London and Brent was up 0.1 per cent ($109.1). While we’re talking Brent, there are calls for the benchmark to be reformed. The problem is that production of North Sea oil has fallen sharply and there is the possibility of sharp spikes as a result. This also occurs at a time when regulators are investigating price manipulation in the crude market.
In markets today, the main macro flow will be the Reserve Bank’s minutes where commentary on the Australian dollar will be of most interest. At the moment the bank has three conflicting targets and the exchange rate target in particular makes policy more random and reactive. Otherwise I’m not sure there is a lot the minutes can tell us. We know the central bank will hold for a while.
Looking abroad the key data includes UK CPI, although the truth is Bank of England watchers may as well not bother with the data as the bank has dropped all its targets and won’t be swayed by economic indicators. CPI has breached the target for years, the unemployment rate target is met and the bank is forecasting strong growth this year – and yet it has stated it won’t be hiking rates anytime soon. Across the channel we see the German ZEW survey, while across the Atlantic in the US we get the Empire manufacturing index and the NAHB housing market index.
Have a great day…
Adam Carr is a leading market economist.
Follow @AdamCarrEcon on Twitter.