Although it slowed in October, the index continued to grow
Insight
Something of a risk-on night for equities and bonds with Greek PM Tsipras saying that a solution was “close” seemingly supporting investor sentiment.
Something of a risk-on night for equities and bonds with Greek PM Tsipras saying that a solution was “close” seemingly supporting investor sentiment. Though not headline moving data, and released earlier in the evening, Spanish house mortgage approvals growth (+19.7% y/y to April) and another report of soaring Irish house prices (+15.8% y/y to April) are pointers to some traction in Euro-area activity.
European officials poured cold water on Tsipras’ statement, the EC saying a deal was not imminent and German Finance Minister Schaeuble saying he was surprised to hear reports of an imminent deal. The Euro had a subsequent hiccup but trades this morning at just over 1.09, where it was late in the afternoon session yesterday. European equities though still closed noticeably higher, positive sentiment carrying over into the US session. There was no mainstream Euro or US data.
The Bank of Canada left rates steady at 0.75%, as expected, with no lasting spillover for the Canadian loonie. The BoC has now left rates steady since its cut in January, the outlook improving of late from a pick-up in oil prices – on which the Canadian economy is dependent – the fall in the C$ and most recently from hopeful signs of US economic progress. Oil prices were lower overnight on signs that Iraq plans to lift its exports by 26% in June, Brent crude down 2.6%.
The NZ dairy giant Fonterra has in the past hour released its first estimate of its milk price payout to NZ farmers for the coming 2015/16 year at $5.25. My BNZ colleague Raiko Shareef reported that this should be NZD neutral-to-mildly positive, simply by virtue of carrying a $5 handle. (That’s been the initial reaction.) Farmer incomes are still going to be very constrained if the payout is finalised at that level. BNZ’s own estimate of the eventual 2015/16 payout is $5.70, based on NZD/USD falling to 0.67 by Sep-16 and dairy prices recovering by ~20% from here to this time next year.
Since the announcement, the NZD has pushed higher by 20 pips to the 0.7260 area, AUD/NZD down equally to around 1.0650. More generally, the AUD/USD has been constrained overnight with no new big moves in the US$ or the Euro. US equity market volatility has eased, copper declined 0.4% but Chinese spot iron ore rose again yesterday, up another $0.32 to $63.10.
After Japanese retail sales for April at 9.50, it’s all about the AU Q1 CapEx report, interest in what the report centring on what it says not only about Q1 but the outlook for business investment for the 2015-16 financial year. This survey’s second estimate was polled in April-May, before the Budget and mostly before the May rate cut.
We look a decline in Capex spending in the March quarter of 2.5%, the consensus almost bang on that decline too. For the 2015-16 second estimate of expectations, we look for total Capex of $A115bn, up marginally from $109bn a quarter ago. That rise stems partly from some increase that almost always occurs with the second estimate as plans are firmed up closer to the start of the new financial year, and also we think from a better Australian economy data flow over recent months that we anticipate will flow into somewhat better non-mining investment expectations where we look for an upgrade to $50bn from $44bn. We expect manufacturing plans to be unchanged at $6bn and mining industry expectations shaved to $A58bn from $A60bn.
After the Capex report, we have Fed President Williams speaking this afternoon at 16.20 AEST, in Singapore, then tonight there is later vintages of Spanish and UK Q1 GDP, the EC Confidence indicators, weekly Jobless Claims in the US, their Apr Pending Home Sales and arch dove Kocherlakota speaking on Monetary Policy speaking toward the end of the US trading session. The Fed has announced overnight that Janet Yellen will not be attending Jackson Hole this year (August), that event usually producing some market-moving statements. It’s also in the lead up to the Sep FOMC, definitely a live date for rate lift-off.
Equities higher in Europe and the US: Eurostoxx 600 +1.3%, Dax +1.3%, CAC +1.9%, FTSE +1.2%. Dow +121 points to 18,163, +0.7%, S&P 500 +0.7%, Nasdaq +0.9%, VIX 13.27 -5.6%. Mumbai +0.6%, Nikkei 225 +1.5% and ASX 200 +0.1%; ASX SPI futures this morning +0.2%. US bond yields: 2s at 0.65% (4), 10s at 2.13% (-1). WTI oil at $57.62 (-0.7%), Brent at $62.28 (-2.3%), Malaysian Tapis (yesterday) $65.68 (-0.7%). Gold at $1188.10/oz (+0.0%). Base metals: LME copper -0.4%, nickel +1.2%, aluminium -0.8%. Iron ore $63.1/t +0.5% Chinese steel rebar futures +0.5%. Soft commodities spot futures: wheat -1.6%, sugar -1.7%, cotton -0.4%, coffee 0.4%. Euro Dec 14 CO2 emissions at €7.21/t (-0.7%). The AUD/USD’s range overnight 0.7691-0.7764; indicative range today 0.7700-0.7775; the AUD/USD is 0.7730 now
The Bank of Canada left rates steady at 0.75%; Fonterra’s 2015-16 forecast milk price initially set at $5.25
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