Australia Expected to Post Another Trade Surplus

Early this morning the US FOMC met for its November meeting to decide interest rates. As widely expected, rates were left on hold at 1.00% although the expected rate hike in December is still firmly on the cards. Overall, the statement from Federal Reserve Chair was uneventful with no market moving commentary. It appears that president Trump has now picked Jerome Powell to be the next Fed Chair. It is likely that this Powell will continue Fed policy in much the same direction that it is already moving in. The gradual path of rate hikes and shrinking of the balance sheet will likely continue.

The US stock market had a relatively uneventful session. Tesla (TSLA) stock was down 3% as the company announced a larger than expected quarterly loss. It also announced that resources will be diverted from Model S and X production to focus on achieving targets for its Model 3 production. The Model 3 is the first Tesla car that is priced for the mass market and Tesla is hoping to achieve a production rate of 5,000 cars per week by the end of Q1 2018.

WTI oil rallied above $55 per barrel early in the session but fell back below $55 after the Department of Energy inventory data was slightly disappointing relative to the API data released yesterday. Although crude inventories still drew down, the draw down was less than API reported. The gasoline drawdown was also smaller than originally reported. Nevertheless, US crude inventories are back on a downward trend after disruptions from hurricane Harvey caused a small build. Energy stocks have been strong on the back of oil's strength.

Today Australia releases its trade balance data which is expected to show a surplus of $1.42bn. This would be a continuation of the surpluses that have persisted all year and have helped bring Australia's current account to some of the smallest deficits in the last 10 years.   

Tonight the Bank of England (BOE) meets to decide interest rates with the market expecting a rise in rates to 0.5% from 0.25%. The BOE cut rates in response to the Brexit uncertainty but now deems that a reversal of this cut is warranted.

Data Releases:

–    Australia Trade Balance 11:30am AEDT

–    UK Interest Rate Decision 11:00pm AEDT

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This article was written by William O'Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.