Global Equities Drop As June Rate Hike Speculation Grows, Stronger Dollar Hurts Commodities & Precious Metals, ASX SPI200 Futures Down 6 Points

On Thursday, global equity markets continued their recent declines, with benchmarks from Asia, Europe & America broadly lower as speculation for a June rate hike in the US grows. Both New York Fed President William Dudley stated June was a “live meeting” while Richmond Fed President Jeffrey Lacker said the case for hiking would be “very strong”, William Dudley is a voting member in 2016 while Jeffrey Lacker is not.

The DAX30 declined -1.48% followed by the FTSE100 -1.82%, S&P500 -0.4% and Nasdaq100 -0.5% while the US Dollar continued recent gains, up a further 0.24% as data showed initial jobless claims of 278,000 vs 275,000, while a slight miss in expectations most economist view claims less than 300,000 consistent with full employment. We still have three more weeks until the June meeting, so we will need to wait and see if any significant volatility returns to markets and if so, will it have any impact of the decision - keeping in mind April meeting minutes suggest the Fed views global risks as subdued.

The British Pound initially gained following better than expected retail sales figures (YoY Apr) 4.2% vs 2.0%, only to finish unchanged halting a three day advance as optimism grows with the “remain” vote leading in Brexit polls. As shown on the image below the Pound is no longer the worst performing currency year to date out of the G10, those honours now go to the New Zealand & Australian dollar.

Commodity prices were also broadly lower on Thursday, however WTI & Brent remained fairly resilient, despite data that showed US oil inventories increased by 1.31 million barrels for May 13th, as media reports continued about reduced supply from Nigeria & Libya continued to support price. WTI & Brent crude oil were both -0.06% & -0.25% lower respectively, Iron ore prices fell 5.83% as did Copper -0.89%, while Natural Gas gained 1.90%. Precious metals Gold & Silver declined -0.3% & -2.47% as speculation around a June rate hike reduced the appeal of the save havens, which are more attractive in a world of lower and increasingly negative interest rates (Europe & Japan).

The Australia Dollar finished relatively flat, down 0.02% as the unemployment rate for April remained unchanged at 5.7% against expectations of an increase to 5.8%. While the unemployment rate has dropped from 6.1% in August 2015, wage growth remains subdued with data earlier this week showing the wage price index (WPI) increased at 2.1% for the March 2016 quarter, the lowest rate since September 1998. This seems to be an increasing theme globally, higher employment but low wage growth which some are attributing to factors such as job insecurity. The ASX200 dropped for the second day in a row on Thursday, down 0.6% and we can expected some further weakness this morning with ASX SPI200 futures down a further 6 points in overnight trading.

Data releases:

·         Canadian CPI (MoM & YoY Apr) 10:30pm AEST

·         US Existing Home Sales (MoM Apr) 12:00am AEST

·         US Baker Hughes Rig Count (May 20th) 3:00am AEST

Source: Rivkin, E-Signal, Amibroker

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.

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.