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Market Opener – 11 Jul 2019

Local Markets Commentary
The Australian market commences today’s trade on an overnight boost for expectations of another US rate cut, plus strong price rallies for key commodities, ahead of a set of influential material domestic reports today, and material reports and data out of the euro zone, UK, and US later today and tonight.

Locally today, May lending finance (including for property purchases) is due from the Australian Bureau of Statistics 11.30am AEST.

Also this morning (11am AEST), the Melbourne Institute publishes its monthly inflation expectations report, and the Reserve Bank of Australia (RBA) two research discussion papers.

Tonight (11.10pm AEST), RBA deputy governor Guy Debelle is speaking publicly, via video link at an FX Week conference in New York.

Regionally, China’s June foreign direct investment is due anytime from today. 

In overnight commodities trade, oil and US gold futures (August) rallied. 

Iron ore (China port, 62% Fe) turned lower.

LME copper swung higher and rallied. Nickel and aluminium also posted strong gains.

The $A appreciated to ~US69.60c after trading at US69.25c early yesterday evening.

Overseas Market Commentary
Volatile trade featured across major European equities markets overnight, amid new growth forecasts and a set of key data updates for the UK.

While US indices opened with decisive gains, some chop subsequently ensued. 

During much-anticipated testimony to a US House of Representatives financial services committee, US Federal Reserve chair Jerome Powell indicated that another rate reduction was possible late-July. 

Mr Powell pointed to uncertainty regarding international economic growth and trade, citing data releases for the euro zone and China since the June FOMC meeting.

However, Mr Powell stated the central bank generally based its outlook on expectations that US economic growth to ‘remain solid’.

Later, the release of June Federal Reserve policy meeting minutes also revealed a bent towards likely further rate reductions.

A quarterly forecasts report from the European Commission reduced the 2020 euro zone growth prediction from 1.5% to 1.4%, but maintained this year’s estimate of 1.2% growth, from 1.9% for 2018. 

The euro zone’s 2019 and 2020 CPI growth forecasts were each revised to 1.3% from 1.4%.

Earlier, among a swag of better-than-feared UK data releases, the May trade deficit was estimated at £2.324B from £3.716B at the end of April.

Industrial production rose 1.4% for the month following a 2.9% April drop. Year-on-year, output was 0.9% higher.

May GDP growth came in at 0.3% after falling by 0.4% in April. Year-on-year, GDP grew 1.5%.

In the US, May wholesale inventories were reported 0.4% higher for May following a 0.8% April rise.

Weekly mortgage applications fell 2.4%, despite 30-year mortgage rates falling to 4.04% from 4.07%, but amid the wait for any US Federal Reserve commentary on the latest US employment statistics. Applications had slipped 0.1% the previous week.

Tonight in the US, the Federal Reserve chair meets with a Senate banking committee.

A June CPI estimate is also due for release, more keenly anticipated following the Fed Reserve’s comments overnight that persistent soft inflation supported a bent to ‘accommodative policy’.

US weekly new unemployment claims and the national June budget statement are also due tonight.

All up, the $US is not expected to trade flat.

Elsewhere, the European Central Bank (ECB) publishes the minutes of its June policy meeting, and the Bank of England the report of its latest financial stability review. 

In overnight corporate news, the general retail mood remained sombre with Levi Strauss warning of an expected sales slowdown for the remainder of the year. The stock was subsequently pushed 12% lower.

Tesla rose ~4% following reports of a planned electric vehicle production boost in California.

Amazon also supported overall sentiment and gains, trading above $US2000 for the first time.
11/07/2019 8:00:00 AM

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