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Market Opener – 16 May 2018

Local Markets Commentary
The Australian market commences midweek trade ahead of further key regional economic indicators and following overnight falls across US equities markets.

In largely negative overnight commodities trade, oil settled higher.

US gold futures were pushed decisively lower.

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

LME copper continued to fall. Nickel turned lower.

The $A dropped below US74.80c after falling to ~US75.10c early yesterday evening.

Also overnight, North Korea suspended talks scheduled for today with South Korea, citing regional US-South Korea military exercises. A proposed meeting between the leaders of North Korea and the US are also seen at risk.

Regionally today, Japan releases a March quarter GDP estimate 9.50am AEST.

China’s April property prices are expected 11.30am, and foreign direct investment 1pm. 

Locally today, the Australia Bureau of Statistics (ABS) publishes its March quarter wage price index 11.30am AEST.

In addition, the Reserve Bank of Australia (RBA) releases a research discussion paper entitled The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss.

Westpac and the Melbourne Institute also release their monthly consumer confidence report, this one likely to reflect reactions to the national budget.

Overseas Market Commentary
US equities markets fell on opening overnight and never looked like recovering.

The $US rallied and 10-year sovereign bond yields rose to seven-year peaks, above 3.0%, and not just briefly, seemingly refuelling inflation jitters.

Further, commentary out of China-US trade talks in Washington indicated no quick fix.

Earlier yesterday, China had reported a slowdown in fixed asset investment and retail sales, but a pickup in industrial production. 

Across the Atlantic, US considerations appeared less in focus, major European indices chopping and swinging amid a batch of influential and mixed data releases.

In the euro zone, a 0.4% final March quarter GDP growth reading disappointed, albeit in line with the initial estimate, following 0.7% for the December quarter 2017.

Year-on-year, GDP was 2.5% higher, against 2.8% three months earlier. The euro subsequently traded at its lowest against the $US for the calendar year-to-date.

March industrial production improved 0.5% following a 0.9% drop in February. Year-on-year, output represented a 3% gain, against 2.6% at the end of February.

Germany’s initial March quarter GDP estimate came in at just 0.3%, following 0.6% for the December quarter. 

In the UK, March quarter weekly earnings (including bonuses) rose 2.6% following 2.8% for the December quarter 2017. Excluding bonuses, growth was calculated at 2.9%, 0.2% ahead of inflation.

The number of new unemployment claims rose by 31,200 in April following a 15,700 increase for March.

The number of people in employment rose 197,000 (to 32.3M) during the March quarter, the largest quarterly increase in just over two years.

An initial productivity estimate represented a 0.5% pull back, however.

Among US data releases April retail sales rose 0.3%, following forecasts of an up to 0.4% improvement. Core sales (excluding volatile sectors) rose 0.4%. March’s core sales were revised higher to a 0.5% increase. 

A New York State manufacturing index jumped 4.3 points to 20.1, following expectations of a slight decline.

Tonight in the US, housing starts, building permits, industrial production and weekly mortgage application reports are due. 

Companies scheduled to report earnings later today or tonight include Burberry (full year), Cisco Systems, Macy’s and Tencent. 

In overnight corporate news, Vodafone released full year results but surprised the most with the announcement that CEO Vittorio Colao planned to leave the company in October.

Specialist US retailer Home Depot was pushed more than 1.5% lower on disappointing quarterly same-store sales, despite market-beating profit.

Amazon fell a similar amount on a proposed new corporate tax in Seattle.
16/05/2018 8:00:00 AM

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