Three main developments overnight, a spike in oil prices, a somewhat more content ECB President, and a renewed AUD warning from RBA Governor Stevens in an AFR interview, the AUD in the wake of the interview pulling back from over 0.77 to 0.7642 this morning.

Oil prices are around 4% higher overnight after the biggest weekly inventory drawdown this century (since January 1999), down a whopping 14.5mb when the market was expecting a 0.9mb run up.  Tropical Storm Hermine severely disrupted shipping in the Gulf, imports down 1.95mb/day accounting for the bulk of the inventory draw.  Even though most of this looks to have been a short term supply interruption, US energy stocks still rose 1.67% in a soft day for US equities.

The ECB left rates on hold and made no change to its Asset Purchase Program, all as expected.  But at his press conference, President Draghi sounded almost proud of how the loan promotion program was supporting lending growth and Eurozone domestic demand this quarter, notwithstanding some recent data jitters from choppy confidence and activity (e.g. the German Ifo survey).  Draghi also implored governments to do more to support growth on the fiscal front, saying there is fiscal space for example for Germany to do more, that’s so far fallen on deaf ears.   The Euro jumped to over 1.13 but it’s back in the mid 1.12s this morning.

Governments doing more to support growth from fiscal policy was also one of the takeaways from the interview Glenn Stevens has done with the AFR and on its website overnight.  (He’s made this point previously.)   On the currency, he did say that the AUD “could give us trouble”, a warning that seemed to play some part in taking the AUD back down from above 0.77 to under 0.7650.  Stevens also made the point that it’s “my position, in recent times, it (the AUD) has been adjusting as it should”.  You could be forgiven for thinking that while there are still some growth uncertainties over the outlook for the non-mining economy, resource bulk commodities prices (and gold) have been good performers, with the terms of trade up in Q2 and further commodity price lifts since, behind the scenes AUD fundamental supports.

Elsewhere overnight, US bond yields rose (2s by 3½ bps and 10s by just under 6bps), the VIX up 0.57. Iron ore gave back $0.32 (-0.55%) yesterday to $58.14/t, but metallurgical coal prices jumped another $6.25 to $166.50, up 3.9% and more than doubling from their lows in late January this year.  On the data front, US weekly jobless claims remained low at 259K, another positive labour market indicator that keeps the September 20-21 meeting still “live”.

Coming up

After NZ credit card spending for August at 8.45, the main releases today are Chinese CPI and PPI at 11.30 as well as Australia’s housing finance approvals for July.  The market is looking for a 1.5% decline in headline owner-occupied approval numbers and interest in investment lending approvals that have risen for the past two months, by 5.3% in May and 3.2% in June, a sign perhaps of demand resilience.

Germany’s current account/trade report for July will likely come and go without market fanfare, the UK report will be more closely scrutinised, as will its July construction output report.  In the US session, Boston Fed President Rosengren is speaking on his economic outlook with Fed President Kaplan also speaking.  There’ll be a focus on the Canadian dollar with the release of their August labour market report with a 14K rise in employment tipped, a rise that would also see the unemployment rate push up from 6.9% to 7.0%.  BoC Governor Tim Lane was speaking overnight and still sounded cautious about the economic outlook.

Overnight

On global stock markets, the S&P 500 was -0.22%. Bond markets saw US 10-years +5.99bp to 1.60%. In commodities, Brent crude oil +3.54% to $49.68, gold-0.5% to $1,342, iron ore -0.5% to $58.14. AUD is at 0.7643 and the range since yesterday 5pm Sydney time is 0.7637 to 0.7731.

Good luck.

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•  Markets Today: 9 September 2016 (PDF, 100kb)

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