US stocks were flat to end the week, while political risks continue to keep European markets on edge.
Spanish bond yields rose sharply and stocks in Madrid fell by 1.8% as allegations of corruption raised the prospect of an unexpected early election.
Similar price action played out in Italy, where the MIB stock index in Milan continued its recent slide. It’s now dipped by almost 9% since the formation of a populist coalition government in early May.
The euro fell to its lowest level against the USD since November, with broader strength in the USD also weighing on the Aussie. US 10-year bond yields fell by five basis points to 2.93%.
And oil prices fell by more than 3%, amid reports that OPEC plans to increase output to make up for possible supply shortfalls from Venezuela and Iran.
Looking ahead, it’s a relatively quiet schedule in Australia while most of the focus abroad will be on key data releases out of the US.
Capital investment data from the ABS on Thursday is expected to show a rebound in the March quarter, following a miss to the downside for the three months to December.
The median forecast is for capex spending to climb by 1%, underpinned by a continued pickup in non-mining investment.
There’s also April data for building approvals (Wednesday 11:30am AEST) — which have so far been holding up well amid a slowdown in the housing market.
And on the subject of a housing slowdown, CoreLogic’s monthly home price index for May (Friday) is also likely to get some attention.
Ahead of a relatively quiet week of local data catalysts, ANZ’s currency strategists said moves in the AUD will be driven by risk sentiment on global markets.
The analysts said they’re looking for some consolidation by the Aussie against the USD, unless there’s a flare-up in trade or geo-political risks.
US markets will be closed on Monday for Memorial Day but there’s some key US data coming up to round out the month, starting with the second reading of Q1 GDP on Wednesday night.
Then there’s income & expenditure figures for April on Thursday night, which include a reading on PCE inflation growth.
PCE is the preferred measure of the US Fed because it smooths out price movements and gives a more accurate account of underlying inflationary pressures.
Core PCE inflation — excluding food & energy costs — is expected to rise by 1.8%, easing back from the previous month’s measure of 1.9%.
And on Friday after Asian markets wrap up there’s the ever-crucial US jobs data, with the US labour market expected to extend its winning streak in May.
The median forecast is for another 185,000 jobs to be added, with annual growth in average hourly earnings edging higher to 2.7%.
Elsewhere, the Bank of Canada has an interest rate announcement on Wednesday night (no change expected) and there’s updated May inflation readings for Germany and the broader Eurozone.
Here’s this week’s full calendar, via ANZ:
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