6 things Australian traders will be talking about this morning

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Good morning.

To the scoreboard:

Dow: 21,009 -20 -0.10%
S&P 500: 2,412 -1 -0.05%
AUD/USD: 0.7428 -0.0033 (-0.51%)
ASX200 SPI futures (June contracts): 5,732 (-8)
Iron ore benchmark 62% fines: $US57.02/t -$US1.48 (-2.53%)

1. Calm but cautious: US and UK stocks traded slightly lower but are still holding at near record highs. The US Federal Reserve’s “Beige Book” summary of economic indicators showed that most of the Fed’s 12 districts are experiencing moderate growth. A June rate hike by the Fed is now almost fully priced in, but there’s more uncertainty as to its policies for later this year. US bond yields fell and the USD continued its recent run of weakness. Find a full summary of the Beige Book here.

2. No love for the AUD: It was a rough night for the Aussie dollar, which fell by 0.47% against the greenback while most other major currencies gained against the USD. The pound climbed after various election poll results caused it to fluctuate, while the euro held above $US1.12 despite ECB president Mario Draghi’s dovish comments earlier this week. China’s yuan also rose by more than 1%. The broader theme of US dollar weakness remains and the USD index is fluctuating around 97 for the first time since the US presidential election in November.

3. Data today: It’s a big day of data releases in Australia, led by retail sales data for April at 11.30am AEST. There’s also private capital expenditure data for March. Markit manufacturing PMI data across Asian markets also comes out today. Tonight, the US has jobless claims and the ISM manufacturing index. Business Insider has previews for the retail sales and CAPEX data releases here and here.

4. Iron ore gets floored: Iron ore closed out the month of May with another shellacking, as benchmark spot prices fell another 2.53% to $57.02 a tonne. It capped off a 17% fall for the month, although last night’s price action was seemingly fuelled by speculation as spot prices for both grades of iron ore fell but steel rebar rose. The fall didn’t help the Aussie dollar overnight, and the miners are unlikely to start the day with much momentum.

5. Oil markets full of intrigue: Oil fluctuated in overnight trade, initially falling by more than 3% as concerns lingered about excess production in Libya. After a meeting in Moscow, Reuters reported that Saudi Arabia’s oil minister said OPEC is committed to bringing oil inventories in line with their five-year average, but Russia’s deputy oil minister was reported as saying that oil prices are set to remain low. Oil then staged a late rally after private inventory data showed a bigger than expected draw, and finished around 1.7% lower.

6. No more shorts: Interesting note here on how US traders are no longer using Exchange Traded Funds (ETF) to short the market. Short interest in ETFs currently comprises just 6.1% of total assets, which is the lowest level since the financial crisis. Instead of short interest in the market as a whole, traders generally focus bearish bets on individual stocks. Despite that, the rise of ETFs has been well documented and they currently account for about a third of all US assets under management.

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