Scoreboard: Confidence caution

Confidence may wobble this week as the budget takes a lashing, with investors likely to follow mixed leads.

It might have been a very different session if it wasn’t for the 13 per cent surge in US housing starts (April data). As it was, stocks saw a modest bid, yields pushed slightly higher and commodities didn’t do much at all.

It looks like investors were reluctant buyers for the session -- and for the week. They didn’t necessarily want to get in there, but found it hard to overlook that spike in housing starts. The data has been rock solid and lingering worries about the economy have declined sharply as a result, although we’re not seeing that in market pricing with bonds rallying hard and equities not doing much at all for the week. 

Equities saw a modest bid on Wall Street, with the S&P500 up 0.4 per cent to 1877, the Dow rose 44pts to 16491, while the Nasdaq was up 0.5 per cent (4090). Over in Europe, the Dax fell 0.3 per cent, the CaC was up 0.3 per cent, while the FTSE100 fell 0.3 per cent.

Forex markets saw light trading, the Australian dollar up only 20 pips from Friday afternoon (4.30pm AEST) to be at 0.9373 at the time of writing. The euro traded on a 50 pip range or thereabouts to be off about 20 pips to 1.3694 while the British pound was up nearly 25 pips to 1.6815. The yen sits just above target at 101.5.

Rates rose slightly in the US. The 10-year bond yield was up about 2bp to 2.52 per cent, the 5-year rose about 1bp to 1.55 per cent and the 2-year is 0.35 per cent.

Commodities trading saw metals weaken with silver off 0.8 per cent, although falls for copper and gold were much more modest -- close to flat actually (gold at $1293). In the crude space, WTI rose 0.5 per cent ($102.02) and Brent was up 0.6 per cent ($109.7).

Elsewhere, The Michigan University’s consumer confidence survey shows a slip in confidence in May, the index falling to 81.8 from 84.1.Then we saw three Fed speakers although only one seemed to say anything of interest. The St Louis Fed President suggested that the Federal Reserve “was a lot closer to its goals than people appreciate”. He suggested the US economy would grow at a robust pace for the remainder of the year.

Markets this week. It’s very light in terms of data and news for Australia this week. Indeed all we see are two comparatively minor releases; Westpac’s consumer confidence survey on Wednesday at 10.30am (AEST) followed by the wage price index at 11.30am (AEST). Neither will move markets much I would imagine although it will be interesting to see what impact all the budget PR, good and bad, has had on confidence. Polls suggest it won’t be good and, in part, that’s got to do with the government itself.

Deception is never smart and it didn’t help that the government was out telling everyone how awful it was -- really doing everything they could to build a sense of foreboding. They’ve really only got themselves to blame for any subsequent drop in confidence -- and that’s before we saw all the commentary. Otherwise we see the RBA’s minutes on Tuesday at 11.30am (AEST) -- they’re on hold!

Looking abroad, there is quite a lot of Fed peak from people like Plosser, Dudley, Kochlerlakota and Fed Chair Yellen (all voters on the FOMC). While in addition to that we also get the FOMC minutes to the April 29-30 meeting. Data wise, the key releases come out later in the week and include exiting and new home sales on Thursday and Friday respectively.

In Europe we get construction output data tonight, current account data Wednesday and the PMIs on Thursday. Friday sees the breakdown of German GDP and the well-respected IFO survey. Other than that it’s worth watching out for UK inflation data, the BoE’s minutes and the breakdown of UK GDP. 

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