6 things Australian traders will be talking about this morning

Good morning.

To the scoreboard:

Dow: 20,895 +90 (+0.43%)
S&P 500: 2,394 +12 (+0.52%)
AUD/USD: 0.7472 -0.0006 (-0.08%)
ASX200 SPI futures (June contracts – 20 minute delay): 5,794 +12
Iron ore benchmark 62% fines: $US63.19 +$US0.50 (+0.8%)

1. When Trump’s away, the market will play: US stocks rose again overnight, getting a boost from oil and the tech-focused NASDAQ index which rose 0.8%. The CBOE volatility index has reversed back under 11 with a respite from political turmoil in Washington as president Trump visits the Middle East. It bodes well for the ASX200 which should push back over 5,800. Miners are getting a boost from stronger commodity prices, while the big banks benefited from being left off S&P’s ratings downgrade list yesterday.

2. Pressure still on the USD: The US dollar index dipped below 97 overnight, with the Aussie dollar pushing back towards US75 cents. The USD was slightly stronger against the pound which fell back under $US1.30, while in Europe the German leader Angela Merkel showed her clout by sparking a rise in the Euro. Merkel said that Europe’s monetary policy has contributed to a weaker currency which has made German exports comparatively cheap. That pushed the Euro above $US1.12 before it fell back slightly:

3. Data today: ANZ’s consumer confidence index comes out today, which will be worth monitoring given the ongoing weakness in domestic consumption as households put a focus on saving. Overnight Germany has GDP data, and preliminary manufacturing PMI data will be released across the US and Europe.

4. The US bull market may not be done yet: Strong Q1 earnings for US stocks were a pleasing sign for equity bulls, and research from Morgan Stanley suggests that a rise in earnings growth is often self sustaining. According to Morgan Stanley, the number of companies now upgrading their earnings forecasts is at the highest level since 2012. Morgan Stanley said that when upward revisions are made to earnings, it bodes well for stock prices over the following 12 months.

5. Actions speak louder than words for the Fed: When it comes to US bond yields, the market is always looking to comments from members of the US Federal Reserve to provide guidance of future interest rate movements. But in fact, this research note suggests that actions speak louder than words for the Fed. It’s findings suggest that comments from the Fed move rates in the short-term, but tracking the Fed’s rate of bond-purchases is a better indicator of market movements in the medium-term across bond yields, stock prices and currencies.

6. Interesting night on oil markets: Oil is still supported above $US50 a barrel as Saudi Arabia’s energy minister flew to Iraq to secure their cooperation on an extension of OPEC supply cuts to March next year. There were concerns that Iraq was an unwilling participant in the cuts as it flagged a need to pump more oil to battle ISIS. Despite the agreement, it may be that OPEC needs to both extend and deepen the cuts to spark a move back towards $US60.

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