Reporting Seasons Continues to Surprise the Market

With almost no significant economic data out this week, markets are mainly being driven by headlines with fears of a US government shutdown next month beginning to take centre stage. The major US benchmark indices drifted lower with the Dow and S&P 500 down 0.4% and 0.35% respectively. Apparently, Trump is demanding that Congress agree to fund his border wall or else he will allow the shutdown to occur. How this will end is anyone's guess but these things do tend to get resolved in time.

Yesterday's unofficial crude inventory data was largely confirmed by today's official Department of Energy data although gasoline inventories actually declined by over a million barrels in comparison to the 1.4m build originally reported by API. Although crude rallied on the news, production increases in the US continue to weigh on the price. WTI crude is currently trading at $48.38 per barrel.

Iron ore prices continue to be strong which has fuelled the bumper profits coming from Australia's largest mining companies. After getting as low as US$31 per tonne in early 2016, prices are now over double that level at US$75 per tonne which is giving the miners very large profit margins on their iron ore operations.

Today, we will get earnings from Flight Centre Group (FLT), South32 (S32), Santos (STO) and Alumina (AWC) (among others). Earnings season continues to provide big surprises for the market with Insurance Australia (IAG) suffering an 8% fall yesterday as its underlying insurance margin was lower than expected.     

  

Data Releases:

–    UK Second GDP Estimate 6:30pm AEST

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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.