Global Equities Rally & Commodities Fall Despite Weaker USD, RBA & Federal Budget To Determine Market Direction, ASX SPI200

Global equities were once again higher on Monday on the back of a weaker US Dollar. The DAX30 (+0.84%), CAC40 (+0.31%), Euro Stoxx 50 (+0.14%), S&P500 (+0.78%) and Nasdaq100 (+0.92%) despite ISM manufacturing data for April coming in lower than expected with a reading of 50.80 vs 51.40 expected. The FTSE100 index was closed due to a bank holiday in the U.K. 

The US Dollar index (DXY) continued to weaken on Monday, down 0.52% which helped the EURUSD move back above 1.15 for the first time since August 2015. From 2014 to 2016 the US Dollar index gained approximately 20%, which was favoured by economies such as the Euro-Zone and Japan however we are now seeing these currencies sharply appreciating against the dollar, the chart below shows the USDJPY falling and EURUSD rising, which will provide headwinds for already low inflation. In order to see a real reversal in this trend we would need to see either 1) a more hawkish tone from the FOMC or 2) further easing policy from the European Central Bank/Bank of Japan.

Commodity prices were lower despite a weaker US Dollar. This may have more to do with the fact Chinese markets were closed on Monday for a holiday, and given the recent impact speculative trading on Chinese Future exchanges has had it really isn’t that surprising. Natural Gas (-6.24%), Copper (-0.77%), WTI Crude (-2.48%), Brent Crude (-4.78%), Spot Gold (-0.15%) and Spot Silver (-1.67%) all declined.

The local market closed modestly lower on Monday, down 0.18% after initial losses of up to 1.30%, meanwhile ASX SPI200 futures are up 12 points in overnight trading suggesting a stronger open this morning. Traders should be aware of the Reserve Bank of Australia rate decision out at 2:30pm Sydney time, which the market is currently pricing around a 53% chance of a rate cut to 1.75%. Also later we have the release of the Australian Government Federal Budget which also has the ability to shape the direction of the market this week.

Data Releases:

·         Chinese Caixin PMI (Apr) 11:45am AEST

·         RBA Rate Decision (May) 2:30pm AEST

·         UK Market PMI Manufacturing (Apr) 6:30pm AEST

·         Australian Government Budget approximately 7:30pm 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.

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