EUR Drop Boosts European Equities, US Equities Rally On Housing Data, Oil Higher Before Oil Inventories Report, ASX SPI200 Futures up 75 Points

European equities rallied on Tuesday as EU Finance ministers meet in Brussels to discuss the disbursement of 11 billion Euros in bail outs for Greece as well as talks on potentially easing debt payments by lengthening maturities and lowering rates. The DAX30 finished 2.18% higher as did the FTSE100 up 1.35% as the Euro finished 1.67% and 0.70% weaker against the Pound and US Dollar respectively. Meanwhile the Pound rallied against the US Dollar, up 0.99% following a survey that showed older voters who were in favour of leaving the EU are now changing their minds as the “remain” vote continues to lead in polls. The chart below shows the Pound which has gained over the past three months from a February low as traders reduce the chance of a “Brexit”.

The market continues to increases expectations of a Fed rate hike in June, with Fed Fund futures now pricing in a more than even chance of raising the benchmark rate at the June 14th & 15th meeting. Over the past week we gave seen more Federal Reserve Presidents adopt a hawkish tone suggesting the world’s largest economy is strong enough to handle the increase in borrowing costs with Philadelphia Federal Reserve President Pat Harker said he could “easily see two to three hikes in 2016” as long as data continues to improve. Looking to US data overnight, the housing market continues to strengthen as new home sales for April jumped 16.6% against expectations of a 2.0% increase. US equities were higher on the news, with the S&P500 & Nasdaq100 up 1.37% & 2.05% stronger with technology and financials leading gains, up 2.07% & 1.61% respectively as the prospect of higher interest rates stands to benefit banks margins.

Oil advanced ahead of US crude oil inventory data out Wednesday where traders expect the data to show stock piles declined last week following supply disruptions in Canada, Libya & Nigeria over the past few weeks. WTI & Brent crude rose 1.12% & 0.54% respectively as did Copper up 0.58% while Natural Gas declined 3.65%. Elsewhere, Spot Gold & Silver were once again hit by the stronger US Dollar with the precious metals falling 1.75% & 0.99%.

Locally, while the ASX200 index fell 0.44% on Tuesday ASX SPI200 futures are up 75 points in overnight trading suggesting a decisively stronger open this morning. If you’re interested in trading global markets but aren’t ready for the risk, click here to open a free $100,000 Rivkin Trader account.

Data releases:

·         Australian Construction Work (Q1) 11:30am AEST

·         German IFO Business Climate & Expectations (May) 6:00pm AEST

·         US House Price Index (MoM Mar) 11:00pm AEST

·         US House Price Purchase Index (QoQ Q1) 11:00pm AEST

·         US Markit Services & Composite PMI (May) 11:35pm AEST

·         Bank of Canada Rate Decision 12:00am AEST

·         US DOE Crude Oil Investories (May 20th) 12:30am AEST


Source: Rivkin, E-Signal, Amibroker

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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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