Scoreboard: Wall Street stride

Stocks had a great session overnight on both sides of the Atlantic. Records were broken once again with the S&P 500 and the Dow at new record highs, while Germany’s Dax wasn’t far off.

Those kinds of moves are interesting considering events in Ukraine. The Donetsk and Luhansk ‘spring’ continues with secession votes passed in both regions. While Russia welcomed the move, it urged spring leaders toward negotiation and dialogue with Kiev. In turn, Kiev has vowed to prosecute the separatist leaders as terrorists. 

Spring leaders, or terrorists? It’s all perspective -- not a great starting point for talks, though. At this point, no referendum has been held on joining Russia although these are planned at some point. Other than that news flow was light and there wasn’t really any major data to speak off. The US monthly budget numbers was about it.

Equities saw decent gains, despite events in Ukraine. Indeed European markets had a strong bid in some cases with the Dax up 1.3 per cent. The CaC in turn was 0.4 per cent higher, while the FTSE100 rose 0.6 per cent. Over on Wall St the S&P500 closed 0.97 per cent higher (1896), the Dow was up 112pts (16695), while the Nasdaq rose 1.8 per cent (4143). Gains were broad-based across sectors with the exception of utilities and telecommunications. Otherwise tech, basic materials and industrials outperformed.

Forex markets were subdued with the euro trading on a 20pip range only and is little changed at 1.3758. Sterling was bid for much of the European session and traded as high as 1.69 (40pips higher), before the offer came on. As I write GBP is little changed from 1630 at 1.6868. The Australian dollar had a similar session, pushing higher as European traders came to market, then giving back any (modest) gains as US markets opened. Currently the Australian dollar is little changed at 0.9362. Yen in turn is at 102.12.

Rates moved modestly higher as US Treasuries hold off. Moves were small though and the 10-year yield was only up 2bp in the end to 2.658 per cent. The 5-year yield followed suit and closed at 1.659 per cent, while the 2 year sits at 0.388 per cent.

Commodities were bid hard, in some cases with copper up 2.1 per cent and silver 2.2 per cent higher. Gold didn’t share in the magnitude of those gains, although it did push higher -- 0.7 per cent to $1296. In the crude space, both Brent and WTI pushed higher with gains of 0.4 per cent ($108.4) and 0.6 per cent ($100.6) respectively following events in the Ukraine.

Elsewhere, the monthly US budget deficit was a surplus of $106 billion in April, although this isn’t unusual for April with a surplus being recorded in that month in 46 of the last 60 years. YTD, the deficit is $306.4bn -- a 37 per cent drop on this time last year. On current estimate, the US should record a budget deficit of around 2.8 per cent this year. Still in the US, Philly Fed President Charles Plosser said that the decline in the US participation rate is primarily due to people retiring. Finally, in the commodity space, Russia is considering a deal with Kiev in which it will cut the price of gas offered if Ukraine pays its gas bill.

Markets today. The SPI suggests Aussie stocks will rise 0.6 per cent today in what should be a good session. In terms of the data, the domestic stuff kicks off at 11.30am (AEST) with new home loans and the ABS house price index. Both should be strong. This afternoon we see a run of Chinese data -- industrial production, retail sales and fixed investment.

Tonight it’s budget time. Expectations are high, the rhetoric is tough -- but then it always is. The proof of the pudding is in the eating, as they say. The consensus is that the deficit will come it at $46bn for this year, $30bn next and then $18bn in 2015/16. That excitement done, the German ZEW survey is out, while for the US, retail sales and business inventories will take centre stage.

Have a great day.