Good morning, and welcome to what could be a huge day for the Australian dollar. Here’s what you need to know:
Markets rise. The sell-off in momentum stocks earlier this month almost seems like a distant memory. After a quiet day’s trade on Easter Monday the rest of the world has come back to work, and the US markets notched up their sixth straight day of gains in the Tuesday session. ASX futures were pointing to the market opening up 22 points today at 5492, so 5500 is within reach today.
Hedge fund disclosures. Bill Ackman’s Pershing Square and David Einhorn’s Greenlight Capital disclosed positions to the market overnight. Ackman revealed a 10% stake in Allergan, which he’s planning to take over with Valeant Pharmaceuticals. The stock rose 15%. Einhorn, meanwhile, revealed he’s short Chipotle, and long Conn’s Inc and Sun Edison, which saw gains of 7.5% and 11.6% respectively. Einhorn, in his investor letter, said there was a consensus “we are witnessing our second tech bubble in 15 years”, and that the signs include the rejection of conventional valuation methods and huge IPO debuts “for companies that have done little more than use the right buzzwords and attract the right venture capital”.
Regional indicators. There’s plenty to watch for in the Asian session; traders will be hoping the US rally transfers to the region after the Nikkei’s 0.85% fall yesterday. Shanghai shares were up 0.35%, partly in reaction to the Government’s move to free up lending in the rural sector. Today is potentially huge with the release of the “flash” estimate for the HSBC Chinese Manufacturing PMI at 11.45am AEST.
Australian inflation. It’s potentially a huge day for the Aussie dollar – and domestic politics – with CPI data out at 11.30am AEST, followed closely by the China flash PMI. The market is expecting a read of 3.2% for Aussie inflation year-on-year, which is beyond the RBA’s comfort zone of 2-3%. Signs that the economy is heating up will invite questions about looming interest rate rises and cause headaches for Treasurer Joe Hockey as we approach the federal Budget in just under three weeks’ time. We’ll have live coverage of the data when it’s released.
Cuts to come. Speaking of Hockey, tonight he’ll lay out a time frame for sharing the recommendations of the feared Commission of Audit, the razor gang which is believed to have identified options for sweeping changes to public spending, including axing some programs entirely. It’s ominous that Hockey has to announce he’s planning some announcements, instead of just announcing them. Steel yourselves.
Dollar strength theory. One of the dramatic shifts in the Australian economy over the past year has been the rapid rise in mining exports, enabled by the huge levels of capex investment during the mining boom. This has been expected but former HSBC chief economist and RBA board member John Edwards believes that this volume and the related income for the mining companies is behind the continuing strength of the Australian dollar, as the economy transitions from a trade deficit to a surplus.
Apple sour. The Cupertino tech giant’s earnings are out at the close of tonight’s trading session in the US. With sales growth tanking and the company slow to roll out new products, BI’s Jay Yarow writes today that it’s time to ask if Tim Cook has seriously mismanaged Apple.
Red Devilled. David Moyes has been fired as Manchester United manager, as expected. Playing veteran Ryan Giggs will act as interim manager until the end of the season. The incoming manager will have hundreds of millions of dollars of a transfer budget to work with. Overnight meanwhile, Chelsea secured a 0-0 draw in their away game against Atletico Madrid in the Champions League.
Happy birthday to thee. William Shakespeare was born 450 years ago today. Many phrases he coined are still in regular use, including “laid on with a trowel”, “the game is up”, and “world is my oyster”. There are more examples here.
Bonus item: GoPro’s ability to give us never-seen-before video footage continues to astound. Here’s what some US Navy pilots put together showing life in the cockpit of a Super Hornet. Whatever your job, it couldn’t be as fun as this. Enjoy:
Have a great day. I’m on Twitter: @colgo
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