Global markets quiet, Australia awaits CPI figures, ASX futures down 20 points

Markets were relatively quiet overseas last night, the Dow was down about half a percent, Germany's DAX up about half a percent. The focus today will be on local Australian news, with quarterly consumer price index data being released at 11:30am. This will effect our dollar as well as share market sentiment, depending on where it comes in versus expectations. Australia's rate of inflation fell significantly over the three quarters ending 31 December, 2014, falling from 3% the July quarter to 1.7% in the December quarter. Oil prices have not fallen since December 2014 to today; in fact, as you can see from today's last chart the prices of both WTI crude and Brent crude are up about 10% for the year so far. Although much of this positive move occurred in April (which will not be recorded in the quarterly stats), the anticipation of higher oil prices will be built into the analysis of the Reserve Bank of Australia when it makes its next interest rate decision in May. What is significant is that as that the market is expecting a year-on-year headline inflation rate of 1.3% - 'headline' meaning that it includes food and energy, as opposed to 'core', which excludes these items. So with oil included in the basket I believe that expectations are already quite soft. Therefore it would take a significant softening of inflation over the March quarter to come in below expectations of 1.3% and I believe the risks of that happening (which would result in some fairly aggressive AUDUSD selling) are less than probable.

Getting back to east coast weather in Australia and in today's first chart I've listed some of Australia's largest insurers - AMP in black, QBE in light blue, SUN in grey and IAG in dark blue. The ASX 200 index CFD is there in orange for a comparison, and you can see that the insurers are split between trading higher or lower than the market for the week thus far. I note a particular vacuum in speculation or coverage of insurers in the press and research that I've received so far this week, so I'm simply pointing this out so that if anyone would like to speculate that these insurers might under-perform once coverage steps up, one might like to take a market neutral position by selling some of these names and buying the ASX 200 in roughly equal dollar amounts. (For example, selling 850 QBE at $13.83 [$11,755] and buying 2 ASX 200 contracts at 5,872 [$11,744].) I'm not an insurance analyst and I don't know how the weather might impact these names as losses are reported (if indeed the event is large enough and the re-insurance is inadequate enough), but I do believe from a behavioural finance standpoint that there may be some selling in these names as more commentary emerges.

Today's second chart is the AUDUSD currency pair - following on the the first paragraph, this is probably a pair to stay away from until the 11:30am (Sydney) volatility surrounding the Australian CPI print has settled and the pair finds its feet once again from midday onwards. If anyone reading this is particularly interested in intra-day foreign exchange trading, please let us know by emailing customerservice@rivkin.com.au or by phoning 1300 748 546. Events like this do provide opportunities for those who have the ability to trade intra-day, and we are doing some FX product work at Rivkin that might assist those with their daily major FX currency trading.

Finally I've posted the year-to-date performance of WTI crude (OILUS) and Brent crude (OILUK), in percentage terms. I know that some clients followed my advice into the spread-narrowing trade that was suggested as the disparity between the two prices blew out in March, and I'd be inclined to take profits at this point and wait to see if any macro events (such as Iranian supply or tensions over the war going on in Yemen) push Brent prices higher again on temporary supply concerns.


Today‚Äôs charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to open a Rivkin Trader account now.

Upcoming economic announcements: Australian CPI out at 11:30am, China leading economic index at 12pm, Bank of England minutes out at 6:30pm, all Sydney time.


This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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