To the scoreboard:
Dow: 21,174 +37 (+0.18%)
S&P 500: 2,433 +4 (+0.16%)
AUD/USD: 0.7545 +0.0034 (+0.46%)
ASX200 SPI futures (June contracts): 5,641 (-20)
Iron ore benchmark 62% fines: $US55.43/t -$US0.60 (-1.07%)
1. Markets quiet ahead of key events: London’s FTSE had some jitters ahead of tonight’s election in the UK, falling by 0.62% although the election polls suggest Theresa May’s conservative party is on track for a comfortable victory. The tone in the US was more risk-on, as stocks got a slight lift, US treasury yields rose and gold fell after written testimony by former FBI director didn’t reveal any significant revelations to destabilise the Trump White House.
2. Oil gets hammered: The small gain in US stocks was somewhat impressive given that oil prices got crushed. The weekly inventory report by the US Energy Information Agency once again caught the market completely off-guard, revealing an increase of 3.3 million barrels against an expected draw of 3.1 million. Benchmark crude was down 4% and West Texas Intermediate dropped by almost 5%.
3. Currencies jockey for position: Major currencies were also little changed, with the pound holding above $US1.29 which suggests a move above $US1.30 in the event of a Conservative victory. The Euro is holding above $US1.12 but fluctuated overnight as Reuters reported that the European Central Bank will lean towards a more dovish inflation forecast at its policy meeting tonight (9:45pm AEST). The Aussie hit a six-week high against the greenback ahead of April trade balance figures today.
4. No love for the ASX: Australian stocks still can’t find traction and are poised to slip again today, with ASX futures traders marking the local index down 20 points. Yesterday’s action was telling, with the local market finishing dead flat despite GDP growth staying in positive territory at 0.3%. That was after futures traders marked the index up by 15 points before the open, but capital flows are still avoiding Australian shares as concerns remain about the 2017/18 economic outlook.
5. When too much iron ore is enough: The 1% fall in benchmark 62% fines overnight took spot prices to their lowest level since July 2016. An increase in steel prices wasn’t enough to bring iron ore prices higher, as iron ore port inventories in China remain at record highs. Further adding to the supply glut, David Scutt reported yesterday that iron ore exports from Port Hedland in WA also just hit a new record high.
6. ETF bubble? In the US, the total amount of funds held in exchange traded funds (ETF) is now at $US2.5 trillion and growing. Steven Bregman from Horizon Kinetics – a managed fund – thinks all that money may be creating a bubble, citing one definition of a bubble as when money moves into an asset without an intrinsic valuation (Bitcoin anyone?). He said the huge capital flows into ETFs has been driven by the re-direction of capital into stocks in a low interest rate environment.
I’m Sam Jacobs and you can catch me on Twitter @Mr_SamJacobs.