To the scoreboard:
Dow: 20,975 -21 (-0.10%)
S&P 500: 2,387 -1 (-0.05%)
AUD/USD: 0.7473 -0.0001 -0.01%
ASX200 SPI futures (June contracts – 20 minute delay) 5,897 -1
Iron ore benchmark 62% fines: $US66.62 +$US0.55 (+0.83%)
1. Markets indifferent to Trump’s tax plan: The Trump administration unveiled its tax plan in a one-page paper overnight. US stocks were largely unmoved, treasuries rose slightly and gold followed but in general there was little reaction on markets. Although the plan shows a commitment by government to follow through on tax reforms, there’s still a long way to go before the legislation is enacted. You can read a great summary of the tax plan proposal here.
2. Aussie dollar gets smoked: The AUD lost another 0.9% against the US dollar, and fell against most currencies. Yesterday’s inflation report reinforced the view that the Reserve Bank is unlikely to move rates anytime soon, and if it does some analysts are suggesting the shift may be to the downside. Interestingly, the AUD’s Kiwi counterpart also got battered, and has now lost almost 2% against the USD in the last two days. Here’s the overnight scoreboard for the AUD:
3. Data today: The ABS releases its international trade price index for the March quarter at 11:30am AEST. RBA governor Phillip Lowe will give a speech tonight at the Renminbi Global Cities Dialogue Dinner. The Bank of Japan will announce its interest rate policy with no change expected to its ultra-accommodative stance. Likewise the European Central Bank will announce its interest rate policy overnight. Despite gains in European markets, the ECB is unlikely to adopt any major changes yet, particularly before the French run-off election on May 7.
4. Oil still caught in a balancing act: The US Energy Information Agency’s weekly crude oil stock report showed an inventory draw-down of 3.6 million barrels against 1.6 million expected as US refineries pick up the pace in preparation for high demand in summer. That eased the downward pressure on prices overnight, but it’s pushed excess supply into the market for refined gasoline. In fact, gasoline stocks rose by 3.7 million barrels against a Reuters survey forecasting a one million barrel drop.
5. Credit risks in China remain apparent: Chinese 10-year government bond yields just hit their highest level in almost two years, The Wall Street Journal reports. The rise is reflective of the risks to China’s economy, as regulators try to balance growth in the economy while also controlling excessive credit growth. Analysts cite the risks posed by the rise of structured credit products, a lot of which are recorded off balance sheet, as banks compete to generate higher returns for clients.
6. Goldman Sachs offers strategy to get rich in earnings season: The Goldman analysts’ thesis is that earnings season can cause dramatic swings in share prices if a company exceeds (or misses) market expectations. They suggest a “straddle” trade, where the purchaser benefits from an excessive price change in either direction. The bank analysed 24,000 annual reports dating back to 1996, and found that straddle trades in earnings season produced an average gain of 24%. You can see a list of which companies have caught Goldman’s eye for this earnings season here.