September 20, 2016

Markets Today: Gasoline dreams

Markets have been tapping their fingers overnight in the lead up to the Fed meeting. Currencies have traded in very contained ranges, the USD only somewhat softer again with the US Treasury curve up 1-2 basis points for the session.

Markets have been tapping their fingers overnight in the lead up to the Fed meeting.  Currencies have traded in very contained ranges, the USD only somewhat softer again with the US Treasury curve up 1-2 basis points for the session.  There has been some re-emerging interest in oil after the softness last week, though even there, it’s been easing back late in the US session, WTI currently up 0.46% and Brent by 0.28%.  European equities were stronger, the E600 Eurostoxx index up 1.02% and the FTSE up 1.54%, London supported by gains in major resource/mining stocks.  US main board indexes have closed flat.  Through all this, the AUD/USD is trading this morning still in the 0.75s, at 0.7533, having tested 0.7570 in the overnight session.

Housing and house prices have been getting some coverage over the past 24 hours internationally and it will be one of the points of interest in today’s RBA Board Minutes for September.  UK Rightmove house prices rebounded in September, up 0.7% after a 1.2% August decline, the UK press reporting again that first-time buyers being priced out of the market, with or without Brexit.

China reported yesterday that property prices were also stronger, in August, up 1.2% across the largest 70 cities, with 64 of the 70 cities reporting higher prices in the month, up from 51 in July.  Beijing and Shanghai reported around 4% gains for the month.  Completing the housing-related trifecta, US homebuilders reported good sales conditions in September, the NAHB Homebuilders index up to a cycle high (with October 2015) of 65, up from 59 and 60 expected.

On the other commodity markets, for the Australian bulk commodities, the largest in Australia’s export mix, iron ore re-opened yesterday and dipped another $0.29 (-0.52%) to $55.68/t, but both met coal and steaming coal were a little higher again, met coal up another $1.00 to a lofty $189 and steaming coal +$0.10 to $71.25 for the Newcastle steaming coal contract.  Gold was up 0.50% to $1,316.60 with LME base metals mixed, copper down 0.25% but nickel having a better session, up 4.37% clawing back most of last week’s 6.2% decline.

Coming up

There is some local information today that will, at the minimum, give the local market pause for thought.

After the weekly ANZ-Roy Morgan Consumer Sentiment measure at 9.30 comes the RBA Board Minutes from this month’s meeting and then the Statistician’s measure of house prices for the June quarter.  This quarterly measure had largely taken second stage to the more up to date CoreLogic data set for which we already have some information for September. But with CoreLogic having made methodology changes to its hedonic price measures in April, the Statistician’s measure of established detached house prices should get more than a glance.  A 3% rise in Q2 prices is tipped for the quarter.  The Statistician provides estimates for each capital city for houses and what they term “attached dwellings”, code for units, apartments and the like.  And as far as house price developments go so far in the spring selling season, auction clearance rates in Sydney and Melbourne remain high, prices apparently making some further net gains through this month.

As for the RBA Minutes, the market is not expecting any particular bombshell that might materially affect pricing for RBA expectations, but their comments on the economy generally, retailing/consumer spending, housing, the labour market and especially the $A are always scrutinised.  Last week’s address from the RBA’s Chris Kent suggested that the Bank still sees the AUD as being overvalued though post-Board Media Statements, the Minutes and quarterly Statements have revealed no policy anxiety.  It’s still seemingly along the lines that “it could yet complicate the economy’s adjustment”.  The recent uptick in coal prices will also be getting their interest.

It’s not a massive night ahead for US data though housing starts and building permits for August will see the Atlanta Fed re-calibrate its measure of residential investment and GDPNow that currently stands at 3.0%.

The other event that could impact the Kiwi and possibly, commodity currency sentiment, is the global dairy auction tonight.  Our BNZ world dairy research authority Doug Steel suggests that trailing milk production has only added to the recent bid tone in GDT auctions, including most likely at this week’s event.  It’s also set to see Fonterra likely lifting its milk price forecasts at its annual result presentation on Thursday morning when we’ll also know the formal result from the RBNZ and a little earlier that morning, the FOMC.  More on that in the next two days.


On global stock markets, the S&P 500 was -0.00%. Bond markets saw US 10-years +1.92bp to 1.71%. In commodities, Brent crude oil +0.28% to $45.9, gold+0.5% to $1,317, iron ore -0.5% to $55.68. AUD is at 0.7534 and the range since yesterday 5pm Sydney time is 0.7533 to 0.7571.

Good luck.

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