US MARKETS END POSITIVELY TO ROUND OUT A GOOD WEEK FOR EQUITIES

US equity markets extended their gains on Friday in a demonstration that investors there are not losing their collective nerve, despite many pundits calling for an end to the US equity rally. It could be the case that strong jobs data and continued low-interest rates will keep traders on the bid coming into US housing data will be released on Wednesday evening, in a sector that will see some big short positions either squeezed out (which would see short-sellers close positions and buy stocks), or rewarded if the number of new building permits and housing starts disappoints.

 

ASX futures closed 14 points higher on Saturday morning and I suspect that, despite the negatives of a strong Australian dollar (US$0.7832) on exporters, the weaker US dollar that is partly causing this is good for just about everybody. The fact that US consumer prices are not pushing the Federal Reserve to raise rates is helping weaken the US dollar, and that benefits many of Australia’s emerging Asian trading partners as well as our commodities prices. Positive moves in precious metals and copper as well as continued medium-term strength in iron ore will help our second-largest equity sector (materials) calm nerves and provide confidence. Bottom line is that, despite any negatives that come from a higher Aussie dollar, investors should use US dollar as a barometer for markets in our region generally – any weakness that the US dollar index exhibits should be warmly welcomed by investors.

 

A bit of selling in iron ore futures on Friday represented some profit-taking as we come into a big data day for China today. So hold your breath and see how the Chinese GDP numbers are received before gauging the impact that this might have on our producers. Chinese iron ore imports are still strong (up 15% year on year), and given the rise in the price of iron ore in 2017 so far, some burst of profit-taking and supply/inventory overshoots are bound to emerge regularly.

 

Keep an eye out for Chinese data at midday today as well as these other high impact events this week, all AEST:

 

  • Monday    12:00              Chinese GDP
  • Tuesday    08:45              NZ CPI
  • Tuesday   18:30              UK CPI
  • Tuesday   19:00              Eurozone ZEW Survey
  • Thursday   TBA               Bank of Japan Policy & Outlook
  • Thursday  11:30              AU Employment Report
  • Thursday  21:45              ECB Rate Decision
  • Friday       22:30              Canadian CPI


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This article was written by Scott Schuberg - CEO, Rivkin Securities Pty Ltd. Enquiries can be made via scott.schuberg@rivkin.com.au or by phoning +612 8302 3633.

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