Scoreboard: Pre-budget calm

Despite the Dow closing at a record on Friday, the local market is tipped to start the week flat as investors eagerly await tomorrow’s federal budget.

The Dow closed at a new record high on Friday, not that there was a lot to guide it, and gains for the actual session were modest.

News and data was light -- in fact for the US we only saw wholesale sales. These were strong though, rising 1.41 per cent suggesting retailers are having a greater time, as are wholesaler. Inventories too jumped over 1 per cent, which is an important sign -- it tells us that wholesalers are planning or expecting further robust sales growth. The only problem is, this is a lower-tier release and is rarely, if ever, market moving.

Equities saw modest gains on Wall Street with the Dow rising 32pts to 16583 (a new record high). The S&P500 in contrast rose 0.2 per cent (1878) and remains about 9pts off its record close. By sector, consumer stocks and healthcare outperformed with utilities the main deadweight. Over in Europe, the major indexes finished weaker for the session, the glow from the ECB’s dovish commentary wearing off for now. At the bell, the Dax was off 0.3 per cent, the CaC fell 0.7 per cent, while the FTSE100 was 0.4 per cent lower.

Forex markets saw plenty of action again with the euro on centre stage. The currency is still reeling in the wake of the ECB’s more dovish tone and the unit lost another 77bp on Friday to sit at 1.3753 -- that’s down from a weekly high of 1.3984. The drop in the euro dragged Sterling down with it, GBP off 75pips to 1.6845. The Australian dollar, however, did little and sits at 0.9362, while Yen is at 101.87.

Rates moved modestly higher as US Treasuries old off. Moves were small though and the 10 year yield was only up 2bp in the end to 2.62 per cent. The 5 year yield wasn’t even up a bp which it closed at 1.628 per cent, while the 2 year sits at 0.38 per cent.

Commodities were mixed again and in the main moves were small. Copper saw the most action with 0.6 per cent gain but elsewhere, there was nada. So gold was flat at $1287, silver was off 0.1 per cent and then in the crude space, WTI fell 0.23 per cent ($99.99), while Brent fell 0.1 per cent to $107.9.

Elsewhere, China’s President Xi Jinping said that the nation needed to get used to a new normal and remain cool-minded as the economy slows. In the US, the Atlanta Fed President Dennis Lockhart, said he expects the central bank to begin using reverse repos when it begins to tighten policy. He said he expected the bank to start tightening rates, gradually, in the second half of 2015 and end QE at the end of this year.

Markets this week. The SPI suggests our stocks will be flat today. Otherwise the Commonwealth Budget comes out Tuesday night. The consensus is that the deficit will come it at $46bn for this year, $30bn next and then $18bn in 2015/16. Otherwise we see NAB’s business confidence survey today at 11.30am (AEST), and then new home loans on Wednesday at the same time. Finally for the Australian data, the ABS releases Motor Vehicle Sales on Thursday at 1.30pm (AEST).

AS for the global flow, we see a decent run of Chinese data this week with Tuesday’s flow showing industrial production, retail sales, and fixed asset investment. On Friday, the Chinese business sentiment indicator is realised. For the US, the key data kicks off Tuesday night with retail sales. On Thursday, there is a plethora of data the key stuff including the consumer price index alongside the Empire State manufacturing index, Jobless claims and the Philly Fed index. On Friday, housing starts and the University of Michigan’s Confidence index are the key reports. There is of course other data out and a number of Fed speakers, but I’ll list them off on the day.

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