US Consumer Spending Jumps Most Since August 2009 As Housing Recovery Continues, EU Equities Fall As CPI Declines In May, ASX SPI200 Futures Down 24 Points

US equity markets were mixed on Monday as traders returned from the Memorial Day long weekend with the S&P500 relatively flat down 0.1%, the Nasdaq100 gained 0.25% and the US Dollar rose +0.35% against a group of its peers. Data showed that the Core PCE Price Index, the Fed’s preferred gauge of inflation, gained 0.2% in April beating estimates of a 0.1% increase and gained 1.6% on a year-on-year basis. Personal spending for April increased 1% against expectations of a 0.7% increase the highest level since August 2009, while Personal Income for March remained stable at 0.4% from a month prior signalling that consumers may drive a second quarter rebound in GDP. This continues the recent trend where we have seen lackluster growth in business & investments with the heavy work being done by households. Elsewhere a measure for consumer confidence dropped unexpectedly prompting some to guess whether the pickup in consumer spending will be sustainable, although in this case we would put more emphasis on the increase in personal spending. Finally the US housing recovery continues with the S&P/Case-Shiller 20 city home price index for March increasing 5.4% from a year prior while nationally home prices increased 5.2% over the year. Importantly traders will now look towards tonight’s Federal Reserve Beige Book and Friday’s Non-farm payroll figures for May to gauge the potential for a June or July rate hike.

European equity markets were broadly lower on Tuesday, led by the FTSE100 (-0.64%) and DAX30 (-0.68%) as Euro-Zone CPI for May decreased 0.1% from year prior while Core CPI increased 0.8% from a year earlier.  On a positive note German retail sales (YoY Apr) increased 2.3% against expectations of 1.7% and unemployment for May dropped to 6.1% from 6.2% the month prior while unemployment for the Euro-Zone remained stable at 10.2% highlighting that while we continue to see improvements in strong economies such as German and more recently France, much of the Euro-Zone continues to underperform. Japanese shares continued their recent gains with the Nikkei225 0.98% higher as the construction industry showed strength with housing starts for April rising 9.0% from a year prior against expectations of a 4.1% increase while construction orders decrease 16.9% suggesting while growth has picked up, futures orders have dropped and gains may be short lived. Finally Canadian GDP (YoY Mar) increased 1.1% less than the expected 1.4% and Prime Minister Justin Trudeau is likely to continue promoting fiscal stimulus to get the resource driven economy back on track. This week continues to look like one of the biggest of the year for data releases and June in shaping up to be a very important month with the much speculated FOMC meeting, Brexit vote & OPEC meeting.

Locally the ASX200 fell 0.54% on Tuesday and the market looks set for further declines this morning with ASX SPI200 futures down 24 points. The chart below shows the technical outlook for the ASX200, while recent buying of dips in the market have been bought momentum is fading suggesting the current rally may be becoming exhausted opening up the potential for near-term weakness. Overall however the longer-term outlook continues to improve suggesting a significant low is in place from February. 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 AIG Performance Manufacturing Index (May) 9:30am AEST

·         Japanese Capital Spending (Q1) 9:50am AEST

·         Chinese Manufacturing & Non-Manufacturing PMI (May) 11:am AEST

·         Australian GDP (QoQ & YoY Q1) 11:30am AEST

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

·         Japanese PMI Manufacturing (May) 12:00pm AEST

·         Swiss GDP (QoQ & YoY Q1) 3:45pm AEST

·         UK Markit PMI Manfuacturing (May) 6:30pm AEST

·         Canadian RBC Manufacturing PMI (May) 12:30pm AEST

·         US ISM Manufacturing (May) 12:00am AEST

·         US Construction Pending (MoM Apr) 12:00am AEST

·         US Federal Reserve Beige Book 4:00am 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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