Wall Street only just managed to finish in positive territory last night -- worsening violence in Iraq was seemingly offset by some positive (albeit minor) data flow. For the US that included the Empire State manufacturing index, which rose to 19.2 from 19.
Shortly after, we found out that industrial production pushed higher with a 0.6 per cent gain in May, while the NAHB housing market index rose to 49 in June from 45. All in all, investors are trading very cautiously for what looks to be the second week of trading.
Equities finished weaker in Europe, with the Dax down 0.3 per cent, the CaC fell 0.7 per cent and the FTSE 100 was off 1.3 per cent. That all appears to be related to geopolitical tensions -- Iraq and Ukraine. Otherwise on Wall Street, the S&P 500 ended 0.1 per cent higher (1937), the Dow rose 5 points (16781) and the Nasdaq was up 0.2 per cent (4321). By sector, energy and consumer goods stocks outperformed, while on the downside we had financials and basic materials.
Commodities had mixed session overnight. Crude markets saw Brent push higher (0.6 per cent to $112.9) on reports that Russia had cut Ukraine’s gas supply following that country’s failure to pay its bills. Russia said that they will only supply gas that has been paid for in advance. Despite that, WTI fell modestly -- only 0.1 per cent ($106.7). In the metals space, we saw gold off smalls ($1272), silver was flat and copper rose 0.6 per cent. Other than that, the slide in the price of iron ore continues, down another 2.1 per cent to $89.
Rates pushed modestly higher overnight -- the US 10-year Treasury yield up a bp or so to 2.596 per cent. The 5-year yield followed suit, to sit at 1.696 per cent. The 2-year yield is then at 0.463 per cent. Aussie futures didn’t show much movement either --10s up 1bp to 97.14, and 3s flat at 97.14.
Forex. The Australian dollar ended the session little changed at $US0.9400, having hit a low of $US0.9375. The euro put on a little, maybe 30 pips, to sit at $US1.3572 as I write, while the British pound is at $US1.6981, unchanged from yesterday afternoon at 4.30 (AEST). Finally, the Japanese yen did little and sits at 101.85.
Elsewhere, data wasn’t particularly hard hitting. In the UK, Rightmove report that house prices rose 0.1 per cent in June, to be 7.7 per cent higher annually. For the US, capital inflows totalled $136 billion for April following outflows of $122bn the month prior. The IMF then came out and cut US growth forecasts by 0.8 per cent to 2 per cent. It suggested weather, a weak housing market and sluggish demand for US exports would weigh in the economy. It said that inflation would remain below 2 per cent till after 2017 and that the Fed should keep rates near zero well after the middle of next year, when markets currently expect the Fed to hike.
Markets today. The SPI suggests Aussie stocks will post a modest fall today (-0.1 per cent). Otherwise for the data, we see Aussie car sales at 11.30am (AEST), and the RBA’s minutes. Recent signals from the RBA suggest that rates will remain on hold for a very long time; I’m not expecting any change to that today, although as always the key will be to look for their commentary on the exchange rate. Looking abroad, UK inflation figures will be released tonight, currently inflation is around target. Then we see the well-respected German ZEW survey. For the US, consumer price inflation and housing starts are the key economic releases.
Have a great day.