Global Equities Mixed Ahead of FOMC Decision, British Pound Strengthens As Traders Lower "Brexit" Expectations, ASX SPI200 Futures 20 Points Higher

European equity markets were mixed on Tuesday, the DAX30 (-0.34%), CAC40 (-0.28%), Euro Stoxx 50 (+0.12%) and the FTSE100 (+0.38%). UK equities were led higher by Standard Chartered (+9.76%) posted a drop in loan impairments and BP Plc (+4.32%) following a surprise first quarter profit. The Euro was 0.49% stronger against the US Dollar while the British Pound reached the highest levels in nearly three months as traders wind back bets on a “Brexit”. While polls suggest the remain vote continues to lead by a narrow gap it’s too soon to tell the likely outcome. In my view, Britain would be worse off not being part of the Euro-Zone, losing trade bargaining power that comes with the membership, US President Barack Obama recently stating the US will be focusing on negotiating with a big bloc to get a trade agreement done, leaving the UK at the back of the queue. Having to negotiate new trade agreements would be a long and costly exercise, and I’m not sure it would leave Britain in a better place given it relies heavily on its exports of goods and services to Europe.

U.S. equities were also mixed on Tuesday, with the S&P500 (+0.19%) led by better than expected earnings by Procter & Gamble Co. and 3M Co. The Nasdaq100 finished 0.47% lower, while both Apple Inc. & Twitter Inc. released disappointing results after the close of market. US Durable Goods Order (Apr) missed expectations with a reading of 0.8% vs 1.9% expected  as business investment remains weak as companies assess the outlook for global demand and Consumer Confidence (Apr) also missed estimates, 94.2 vs 96 expected. As a result the US Dollar Index (DXY) finished 0.28% weaker. Traders keep in mind we have the FOMC rate decision for April out at 4am AEST on Thursday, while traders are pricing in 0% chance of a hike at this meeting, the language used to describe the decision will be watched closely for clues as to the next hike. Currently September 2016 is the first month with a 50% probability of a hike.

Commodities closed mixed on Tuesday, Iron Ore (-4.98%), Copper (-0.78%), Natural Gas (-2.42%), WTI Crude (+3.28%), Brent Crude (+2.83%), while precious metals Spot Gold & Spot Silver closed 0.44% and 0.95% higher respectively. While the recent moves higher in commodities can be partly attributed to an improving Chinese economic outlook, it is also receiving a boost from Chinese speculators. This will be an interesting scenario to watch play out, given the lessons learnt from the recent equity bubble in China regulators may begin to crack down on this. The chart below shows parabolic move in Steel Rebar futures traded on the Shanghai Futures Exchange, up approximately 46% year to date.

The local market looks set to open higher this morning with ASX SPI200 futures up 20 points in overnight trading while the Australian Dollar finished stronger at 0.7752, up 0.48% against the US Dollar. 

Data Releases:

·         Australian CPI (QoQ & YoY Q1) 11:30am AEST

·         UK GDP (YoY Q1) 6:30pm AEST

·         US Department of Energy Crude Oil Inventories (Apr 27th) 12:30am AEST

·         US Federal Open Market Committee Rate Decision 4:00am AEST

·         NZ Reserve Bank of NZ Rate Decision (Apr) 7:00am AEST


Source: Rivkin, Bloomberg, Updata

To view the Rivkin economic calendar and Global Markets matrix, members can click here.

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.

Complex product warning

This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice and dealing services on securities, derivatives and superannuation (SMSF). Rivkin also provide SMSF administration and accounting services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.