Global Equities Higher, Oil Gains On Inventory Declines, PBOC Fixes Yuan At Weakest Since March 2011, ASX SPI200 Futures Up 34 Points

Global Global equities rallied for a second day in a row on Wednesday, as investors began to come to terms with the idea that a Fed rate hike in June/July isn’t such a bad thing. Data from the US showed housing continued to strengthen with the House Price Index (MoM Mar) beating estimates of a 0.4% gain with a reading of 0.7%, while a report from the Federal Housing Finance Agency said home prices increased 5.7% during the first quarter.

US equities rallied with the S&P500 & Nasdaq100 up 0.70% & 0.72% respectively. Elsewhere, the Toronto Exchange (TSX) index rallied 0.72% after the Bank of Canada left interest rates unchanged at 0.5%. European equity markets were also higher with the DAX30 & FTSE100 up 1.47% & 0.70% respectively, following an agreement by Euro finance ministers to unlock funds for the Greek bailout earlier in the week while IFO surveys in Germany for May suggesting the business climate, current assessment and expectations broadly improved. 

The US dollar declined 0.18% against a basket of its peers which helped boost commodities prices led higher by WTI & brent crude oil up 1.93% & 2.32% respectively following a report that showed US inventories decline 4.2m barrels vs estimates of 2m. The copper price also gained +1.72% and natural gas +0.60%. Meanwhile Iron Ore declined 1.85% on concerns of continued Chinese steel oversupply while spot gold declined 0.23% as spot silver rose 0.59%.

Elsewhere, Chinese policymakers lowered the Yuan to the lowest fixing level since March 2011 while the Renminbi trades below the January highs at the peak of market turmoil, shown on the chart below, suggesting traders remain relatively calm about the devaluation so far. Keeping in mind the PBOC sets the official rate each morning and then buys & sells dollars in the open market to ensure the Yuan trades within a 2% band of the official rate. Yesterday’s decline was only 0.3% and shows the PBOC may be trying to alleviate some depreciate pressure early ahead of a potentially stronger dollar in June/July for which a rate hike is not fully factored in yet.

Looking to the local market and the ASX200 closed 1.45% higher on Wednesday and looks set for another strong open this morning with ASX SPI200 futures up a further 34 points in overnight trading. 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:

·         UK GDP (QoQ & YoY Q1) 6:30pm AEST

·         US Initial & Continuing Jobless Claims (May 14th & 21st) 10:30pm AEST

·         US Durable Goods Orders (MoM Apr) 10:30pm AEST

·         US Pending Home Sales (YoY Apr) 12:00am


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 info@rivkin.com.au or by phoning +612 8302 3600.

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