S&P500 & Dow Jones close positive for first time in 2016, BOE & SNB keep rates on hold, commodities higher, ASX futures up 24 points.

Overnight, the S&P500 Index closed in positive territory for the first time in 2016, having rallied by more than 13% from the February lows to erase the early January loses (chart 1). The Dow Jones Industrial Average index also closed in positive territory for the first time in 2016, while the Nasdaq100 remains below the early January highs. This is a positive sign for equity markets and signals a risk on environment on additional stimulus from the Bank of Japan & European Central Bank while the US Federal Reserve is expected to raise interest rate more moderate pace than originally anticipated.

Overnight, the Bank of England kept its benchmark interest rate at a record low of 0.5% in the face of the upcoming referendum on June 23rd to remain within the EU and inflation expectation to remain subdued. The pound strengthened following the decision, up 1.56% and the FTSE100 index closed 0.42% higher. Elsewhere in Europe, the Swiss National Bank (SNB) left rates unchanged with the deposit rate remaining at -0.75%. The second chart below highlights the CHF/EUR up 3.54% since February, following the European Central Banks decision to cut rates and expand their quantitative easing program, and I wonder whether further action will be required by the SNB to keep the CHF weaker. 

Finally taking the lead from European & US markets, ASX SPI200 futures are trading 24 points higher suggesting a stronger open this morning. Oil closed higher with WTI & Brent crude up 4.84% and 2.93%, Natural Gas closed 6.20% higher, while Iron ore and copper were also up 4.70% and 2.46%. Given these higher prices in commodities I expect the resources sector to be stronger today and the final chart shows the Australia dollar trading higher on the back of the rise in commodity prices.

Source: Rivkin, Bloomberg, Updata

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This article was written by James Woods, Global Investment Analyst - Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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