Scoreboard: GDP shock

Wall Street closed higher despite GDP for the March quarter coming in much worse than expected, while the Australian dollar regained some ground to sit back above US94c.

It turns out the slump in US growth was much worse than anticipated. Growth for the March quarter fell 2.9 per cent -- the weakest growth outcome in about five years. This is a fairly sizable downward revision from the second estimate by the way, which initially showed a 1 per cent fall.

Driving the downward revision was weaker consumer spending, revised down to 1 per cent from 3.1 per cent -- and exports.

Markets largely ignored this release -- largely but not entirely -- as rates eased further. Equities instead focused on the view, which I think is the right one, that the dip in growth is temporary.

Equities saw a decent bid on Wall Street with the S&P 500 closing 0.5 per cent higher at 1959 -- not quite offsetting the fall of the previous session. The Dow underperformed slightly, rising only 49 points (16867), while the Nasdaq was up 0.7 per cent (4379). In Europe, the Dax dropped 0.7 per cent, the CaC was off 1.3 per cent and the FTSE 100 fell 0.8 per cent.

Commodities had a mixed session, gold ($1320) and silver were down smalls, although copper rose 0.5 per cent. In the crude space, WTI rose 0.7 per cent ($106.7), while Brent was down 0.1 per cent ($114.1).

Forex markets saw a modest bid on the euro to $US1.3631 (about 20 pips) and while The British traded on a 50 pips range it ended little changed at $US1.6983. As for the Australian dollar, its sits at $US0.9406 -- about 45 pips higher than yesterday afternoon. The US dollar is buying around 101.86 Japanese yen.

Rates eased further overnight, the US 10-year yield falling 2bp to 2.560 per cent. The 5-year followed suit, falling just under 2bp to 1.652 per cent, while the 2-year is at 0.48 per cent. While the weaker than expected US GDP result would have weighed, a solid 5-year Treasury auction (strongest demand in 11 months) also acted to keep yields down. Aussie futures were effectually flat 3s at 97.29 and 10s at 96.395.

Elsewhere, US data wasn’t great. Durable goods orders fell 0.1 per cent in May after a 0.4 per cent gain the month prior. Then we saw Markit’s US composite PMI for June, which rose to 61.1 from 58.4. The only other piece of data came from Germany, where GfK’s estimate of consumer confidence was up slightly to 8.9 from 8.6.

Markets today. The SPI suggests that stocks will rise 0.2 per cent today. Data wise the only piece of Aussie flow comes at 11.30am (AEST) with Job Vacancies. Other than that, we have to wait till 7.30pm (AEST) when Bank of England Governor, Mark Carney, speaks on financial stability. For the US, key data includes jobless claims, the monthly consumer spending and income numbers, the Kansas City Fed Manufacturing survey and finally, a speech from the Richmond Fed President Lacker.

Have a great day. 

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