To the scoreboard:
Dow: 21,384.28 +24.38 (+0.11%)
S&P 500: 2,433.15 +0.69 (+0.03%)
AUD/USD: 0.7619 -0.0002 (-0.03%)
ASX200 SPI futures (Sept contracts): 5,723 (+9)
Iron ore benchmark 62% fines: $US55.75/t (+0.94%)
1. USD weakness continues: The US dollar fell on Friday as a run of poor recent data continued, with new housing construction starts falling to an 8-month low in May. Also weighing on the greenback is that US treasury yields remain compressed despite last week’s interest rate hike by the US Federal Reserve. This chart from Greg McKenna at AxiTrader shows how poor data releases have driven Citi’s Economic Surprise Index to a multi-year low, and the USD is following suit.
2. Aussie stocks in a state of flux: The tech-focused NASDAQ index fell again on Friday but it wasn’t enough to drive the Dow lower, and stocks in Europe also rose. With no major data releases in Australia this week, the ASX200 is likely to take a lead from price action on global markets and futures traders have marked the local index up by 9 points. The only release of note on the data front today is new motor vehicle sales in May from the ABS, while later tonight in the UK Brexit negotiations are scheduled to kick off.
3. RBA remains confident: Reserve Bank of Australia board member Ian Harper has cited last week’s strong employment report as evidence that wage growth is set to rise and inflation will follow suit. In comments to the Australian Financial Review, Harper said that the growth in full-time work was evidence that extra slack in the labour market is starting to wear off.
4. Wall Street still swimming in cash: Despite a raft of tables and charts in recent months which suggest that US stocks look overvalued, money continues to pour into Wall Street at a record clip. Data from Bank of America Merril Lynch showed that for the week ending June 14, $US24.6 billion flowed into US equities – the most since the US election. Combined with a further $US9 billion into high-yield corporate debt, the combined capital inflows were the second highest on record.
5. Momentum continues in US shale: The Baker-Hughes rig count showed that the number of oil rigs in the US increased for the 22nd straight week. With West Texas Intermediate (WTI) trading below $US45 though, the break-even point for producers may start to come under pressure. Higher steel prices saw iron ore hit its third straight day of gains for the first time since April, although prices for benchmark fines are still 41.2% lower than their February highs.
6. Gold down but not out: Gold finished the week lower and closed below its 200-day moving average for the first time in a month on Friday. Prices fell by 1.7% following the US Federal Reserve’s interest rate announcement, but the fact that bond yields stayed compressed and the US dollar remains weak should provide a floor for the precious metal in the near-term.
I’m Sam Jacobs and you can find me on Twitter @Mr_SamJacobs.