6 things Australian traders will be talking about this morning

Image: iStock

Good morning.

To the scoreboard:

Dow: 20,897 -23 (-0.11%)
S&P 500: 2,391 -3 (-0.15%)
AUD/USD: 0.7393 +0.0011 (+0.07%)
ASX200 SPI futures (June contracts – 20 minute delay): 5,817 +6
Iron ore benchmark 62% fines: $US61.38 +$US1.00 (+1.6%)

1. Markets flat on US data miss: US markets lost momentum on Friday as inflation data and retail sales missed expectations. That saw US bond rates drop and the US dollar was a little weaker. Across the pond, London’s FTSE hit a new record high at 7,435 while Europes STOXX index rose 0.3%.

On the soft-data front in the US, Michigan’s consumer sentiment index rose for the fourth straight month, but Citibank’s economic surprise index fell again. This handy chart by Greg McKenna at AxiTrader shows the recent diversion from the S&P500 as well as other key trends:

2. Australia today: The Aussie dollar found resistance above US74 cents in overnight trade on Friday and is hovering just below that level this morning. The slightly weaker data in the US on Friday had a bigger effect on currency markets than stocks, with the euro, yen and pound all rising against the greenback. Despite some heavy falls last week in the fallout from the government’s bank levy, traders expect the ASX200 to show some resilience today with SPI futures up six points.

3. Key data: China kicks off with four April data points today: urban construction investment, retail sales, industrial production and foreign direct investment. It will be worth watching to see if China’s move to curb speculative lending in its financial sector is causing a slowdown in the broader economy. In Australia, the ABS releases home loan data for March.

4. Commodities wrap: The weaker US data also extended to gold, as it found support on Friday and is up again this morning to just below $US1,230 an ounce. It’s down 5% from its April high but is still up 5.8% for the year. Spot iron ore held above $US60 a ton on Friday night after futures trading had suggested another fall.

On oil markets, benchmark crude held just above $50 a barrel, but markets are still unconvinced about prices. It may be that OPEC will have to flag both an extension to supply cuts as well as deeper cuts at their May 25 meeting to get a sustained move back to $US60.

5. Guess who’s back: Europe’s back. With consistent data this year showing that the worst of its growth worries may be behind it, global capital is now flooding back into European markets. Although the ECB is maintaining ultra-leniant monetary policy to try and avoid tail-risk, sentiment has climbed since Emmanuel Macron’s victory in the French presidential election. A record $US6 billion flowed into European stocks last week, mostly through Exchange Traded Funds.

6. Too many active funds: There’s been a well-documented move away from active fund managers into passive funds which track major shares indices. Even active fund managers are agreeing. Martin Gilbert, CEO of the $385 billion fund manager Aberdeen Asset Manager, agrees that a simple index fund may be more suitable for some investors. Gilbert says that good active managers can still outperform, and they can provide better returns in emerging markets where there are more inefficiencies to exploit.

Bonus item: Here’s a quick summary of China’s “Belt and Road” global trade initiative unveiled on the weekend.

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