Global Equities Gain With Pound, US GDP Revised Higher For First Quarter, ASX SPI200 Futures Up 83 Points

European equity markets posted the first gains in two days following the outcome of the referendum to leave the European Union. EU leaders met in Brussels for a two-day European Council summit where they are likely to press outgoing U.K. Prime Minister David Cameron over what type of relationship can be expected from his successor. The conservative party in the U.K. is also stepping up its time line for the selection of the new PM from October to September and we have seen EU leaders call for the U.K. to act as fast as possible to reduce the turmoil across financial markets. Risk assets followed the British Pound higher as it gained +0.89% after falling roughly 12% over the prior two days, the DAX30 gained +1.93%, the Euro Stoxx 600 +2.57% and the FTSE100 +2.64%.

US equity markets were also higher on Tuesday as a third and final reading of US GDP for the first quarter was revised higher to 1.1% from 0.8%. The S&P500 gained +1.78% as did the Nasdaq100 +2.13% while the US Dollar index fell -0.59%. GDP data shows that consumer spending continues to be the main driver of growth while business investment remains relatively weak. Low unemployment and interest rates also continue to be supportive of the US housing market which continues to show signs of strengthening and in turn encourages consumer spending similar to what we see in the Australian economy. The S&P/Case-Shiller Composite-20 which measures the value of residential real estate in 20 major US metropolitan areas gained +5.44% in April from a year earlier, beating expectations of a 5.41% increase while a broader measure of the US Home Price Index increased +5.03% down slightly from 5.11% a year earlier.

A weaker US Dollar helped boost commodity prices, both WTI & Brent crude oil gaining +3.28% & +3.18%, as did Copper +2.29% and Natural Gas making the biggest increase up +7.40%. The chart below highlights the Natural Gas prices which have made strong gains recently as a result of increased demand for electricity as a result of a warmer US summer, the closure of drilling platforms and supply interruptions. Elsewhere spot gold dropped -0.97% as buying pressure for the safe haven subsided while spot silver gained +0.22%.

Locally the ASX200 closed lower on Tuesday, down -0.66% meanwhile the market looks set to open decisively stronger this morning with ASX SPI200 futures up 83 points. If you're interested in trading global markets and still need practice, click here to open a free $100,000 Rivkin Trader account.

Data Releases:

·         Australian HIA New Home Sales (MoM May) 11:0am AEST

·         German GFK Consumer Confidence Survey (MoM Jul) 4:00pm AEST

·         U.K. House Prices (YoY Jun) 4:00pm AEST

·         German CPI (MoM & YoY Jul) 10:00pm AEST

·         US Personal Consumption Expenditure Core (MoM & YoY May) 10:30pm AEST

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

·         US Crude Oil Inventories (Jun 24) 12:30am AEST

Source: Rivkin, Bloomberg

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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.