Good morning and happy Friday.
To the scoreboard:
Dow: 20,981 +6 (+0.03%)
S&P 500: 2,389 +1 (+0.06%)
AUD/USD: 0.7468 +0.0002 +0.03%
ASX200 SPI futures (June contracts – 20 minute delay) 5,905 -4
Iron ore benchmark 62% fines: $US66.42 -$US0.20 (-0.30%)
1. ECB plays it cool: The European Central Bank president left interest rates on hold and maintained its stimulus program as expected. Mario Draghi said that the European economy was showing signs of health, but said that inflation indicators were still too low to warrant a change in policy. Confirmation of the ECB’s stance sent the Euro down 0.7% against a strongly performing pound, which also gained ground against the US dollar rising above $US1.29.
2. Supply takes the upper-hand in oil price battle: Oil hit a one-month low overnight as Libya restarted production after protests which blocked two key pipelines and US gasoline inventories climbed on weak demand. Both Benchmark crude and West Texas Intermediate fell by more than 1% before rallying later in the session. Reuters reports that the US shale oil boom has raised the risk of competition with OPEC, which has flagged an extension to supply cuts in June but may change its outlook if US shale producers stand to benefit from higher prices and increased market share.
3. Key data: In Australia we have private sector credit and the Purchaser’s Price Inflation (PPI) index. Later tonight the US reports on Q1 GDP, and the Atlanta Federal Reserve’s GDPNow Tracker, which forecasts growth, just fell to an all-time low of 0.2% for the first quarter. Economists surveyed by Bloomberg are predicting Q1 growth of 1%.
4. Markets unmoved by events in Washington: US stocks were flat as the market continues to assess the Trump administration’s market-friendly tax reforms and the impending debt ceiling legislation. The stronger pound drove the UK’s export-focused share index down by 0.7%. The Mexican peso regained ground after US president Donald Trump backtracked on statements to remove the US from the North American Free Trade Agreement (NAFTA), gaining 0.85% after falling by 1.7% the previous day.
5. Australia today: The ASX200 will be relying on financials to drive gains today, as the UK listings of both Rio (-2.35%) and BHP (-4.78%) fell overnight, pointing to a weak lead this morning. The Aussie dollar is feeling the pressure at 0.7470 and saw some volatility in the North American session when it fell as low as 0.7441. Iron ore has steadied at the end of this week in the mid-$US60 range, with iron ore futures up by 1.8% overnight:
6. Chinese regulators stay on credit watch: Chinese authorities are continuing their attempts to avoid a credit bubble, raising short-term borrowing costs between banks to their highest level in two years. The Financial Times reports that the Shanghai interbank overnight rate climbed to 2.792%, almost 1% higher than a year earlier. Reducing liquidity in inter-bank lending is the current preference for regulators as they try to control systemic banking risk without stifling economic growth.