Commodity Stocks Out-peform Broad Equity Declines, Glencore Sees Demand Exceeding Supply, ASX SPI200 Futures Down 33 points

Global equities fell on Wednesday as investors took profits after strong gains on Tuesday. European indexes traded lower, the DAX30 & Euro Stoxx 50 down -0.70% & -0.75% respectively, while the FTSE100 remained relatively flat up 0.09% despite disappointing industrial & manufacturing data (MoM Mar, 0.3% vs 0.5% expected & 0.1% vs 0.3% expected). A weak consumer sector led US equity markets lower following disappointing earnings results from Walt Disney Co. and Macys Inc. The S&P500 & Nasdaq100 both fell -0.96% & -0.93% respectively. So far this earnings quarter, around three quarters of US companies have reported, of which around 54% have exceeded analyst estimates. While the Federal Reserve has signalled a very gradual path of raising rates, we need to see a either the concerns around a “Brexit” scenario resolved or stronger second quarter earnings from companies in order to provide the catalyst for equities to head higher.

Energy & metal producers were positive for the day as commodity prices continued to strengthen, with WTI & Brent crude oil rallying +3.52% & +3.42% respectively as supplies in the US dropped unexpectedly. Copper rose +0.53% following a forecast from Glencore PLC that demand is set to exceed supply, contrasting with recent comments from BHP CEO, Andrew Mackenzie, who noted “Markets remain oversupplied, sentiment cautious and we expect a period of prolonged lower commodity prices and volatility”. The chart below shows the price of Iron Ore, which while up 0.53% on Wednesday is down approximately 21% from one month prior.

The ASX200 closed 29 points (+0.55%) higher on Wednesday as the Westpac Consumer Confidence Index provided a reading of 103.2 vs 95.1 prior. Meanwhile ASX SPI200 futures are down 33 points in overnight trading, suggesting a weaker open this morning however I expect the resources sector to remain resilient given higher prices overnight.

Data releases:

·         Australian Consumer Inflation Expectations (May) 11:00am AEST

·         Euro-Zone Industrial Production (YoY Mar) 7:00pm AEST

·         Bank of England Rate Decision (May) 9:00pm AEST

·         Bank of England Inflation Report (May) 9:00pm AEST

·         US Initial & Continuing Jobless Claims (May 7th & April 30th) 10:30pm 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 or by phoning +612 8302 3600.

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