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Research

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Market Opener – 07 Jun 2019

 
Local Markets Commentary
The Australian market commences Friday trade ahead of a Monday public holiday long weekend for the ASX, a G20 finance summit over the weekend, and clarification of the possible Monday implementation of US import taxes on goods from Mexico, following another overnight positive close for US equities markets, and with China’s markets closed today.

Locally pre-trade, AiG releases its May construction sector activity index.

May housing finance figures from the Australia Bureau of Statistics (ABS) are due 11.30am AEST. Any definitive statistics for the last two weeks of May (post-national parliamentary election) will be particularly noted.

Regionally, China is scheduled to publish May trade figures early-afternoon Monday, before ASX trade opens for the week.

In overnight commodities trade, oil seesawed higher.

US gold futures (August) extended the past week’s gains beyond $US1340.0/oz.

Iron ore (China port, 62% Fe) reportedly gained slightly to remain above $US100.5/t.

LME copper swung higher. Nickel continued lower.

The $A traded in a narrow range, after approaching US69.80c early yesterday evening.

G20 finance heads are meeting in Japan over the weekend. G20 central bankers are already there and have been meeting since yesterday. A leaders’ summit is scheduled for 28 – 29 June.

Overseas Market Commentary
Major European and US equities markets diverged overnight, as investors digested key euro zone data, awaited clarification on the status of US-Mexico trade tariffs talks, and continued to heed US Federal Reserve policy accommodation comments from earlier this week, ahead of US jobs figures tonight. 

Central bank commentary featured in overnight considerations, the European Central Bank’s (ECB) post-policy meeting statement, forecasts and press conference helped propel the euro higher against the $US and British pound.

The ECB altered both regional GDP growth and inflation forecasts.

CPI growth for 2019 was raised from 1.2%, predicted in March, to 1.3%. Expected 2020 CPI was lowered by 0.1% to 1.4%.

Anticipated 2019 GDP growth was lifted to 1.2%, but lowered for 2020 and 2021, to 1.4%.

Earlier in the evening, a final euro zone March quarter GDP growth reading had surprised on the upside, coming in at 0.4% for the three months, double the rate of growth for the December quarter 2018.

Year-on-year, March quarter GDP was 1.2% higher.

The ECB also however, pushed back the timeline for any potential rate increases from not before the end of 2019 until at least mid-2020.

President Mario Draghi acknowledged uncertainty had been extended by trade protectionism, international governmental relationships, the UK’s attempts to finalise an agreement governing the detail of separating from the European Union (EU) and struggling select emerging economies. 

Mr Draghi acknowledged the central bank’s governing council had discussed easing rates and reintroducing other easing policy, but had unanimously decided to stay its hand, having agreed outlook had not ‘substantially’ worsened.

Among current lending arrangements, the ECB lowered select borrowing.

Bank of England governor Mark Carney, in the meantime in Japan for the G20 finance summit, urged those advancing policy change within advanced economies to realise the impacts on emerging economies and hence global economic health.

Meanwhile the US president proffered he would likely decide whether to impose additional import taxes on goods from China following the 28 – 29 June G20 leaders’ summit.

In addition, the president had declared late-Wednesday that Mexico needed to do more to avoid the US implementing an across-the-board 5% import tax from this coming Monday (10 June). This was then followed by overnight reports however, that an implementation delay was considered possible by some.

In new data releases additional to the euro zone GDP, Germany’s April factory orders were reported 0.3% for the month following a 0.8% March increase.

A May construction PMI fell 1.6 to 51.4.

Yields for a German 10-year bond auction in the meantime fell to -0.232%.

In the US, the April trade deficit pulled back 2.1% to $US50.8B, on a 2.5% fall in imports (to $US257.64B) and 3.1% drop in exports (to $US206.85B).

Notably, the US goods trade deficit with China jumped 29.7% to $US26.9B.

A May job layoffs report estimated planned layoffs soared by 85.9% year-on-year, following a 10.9% April rise.

Weekly new unemployment claims were reported flat, at 218,000.

March quarter productivity was revised to a 3.4% year-on-year increase, from an initial 3.6% estimate and following a 1.9% improvement for the December quarter.

Tonight in the US, May national employment statistics are keenly anticipated, following Fed Reserve chair policy accommodation comments earlier this week, followed by a soft private sector jobs report Wednesday.

April wholesale inventories and consumer credit are also due.

Elsewhere, UK PM Theresa May steps down.

Germany’s trade and industrial production reports are especially anticipated, following the ECB’s overnight post-policy meeting commentary.

Germany’s central bank (Bundesbank) also publishes a set of half-yearly forecasts.

In overnight corporate news, Ford Motor announced it would close a manufacturing facility in Wales and would likely book an associated $US650M charge.
 
7/06/2019 8:00:00 AM

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