need2know: ASX seen rising at open
Local investors will be looking for data this week as they search for a new market catalyst. ASX futures up 0.4%. Housing finance ahead.
What you need2know
SPI futures up 20pts or 0.4% to 4932 on Saturday morning
AUD +0.6% to 75.47 US cents, 81.45 Japanese yen, 66.11 Euro cents and 53.46 British pence
On Wall St, Dow +0.2%, S&P 500 +0.3%, Nasdaq +0.1%
In Europe, Stoxx 50 +1.4%, FTSE +1.1%, CAC +1.4%, DAX +1%
In London, BHP +4.5%, Rio +3.7%
Iron ore is fetching $US54.57 per tonne
Spot gold flat at $US1240.69 on Friday in New York
Brent crude +6.1% to $US41.85 on Friday in New York
LME copper flat at $US4650
What’s on today
Local data: Housing Finance Feb at 11.30am
NAB expects a rise of nearly 2% (Forecast +1.8% m/m) a bounce back from the prior month. The data is likely to continue to show that the composition of lending has shifted – as desired by APRA – with slower growth in lending for investor housing and stronger growth for owner-occupied lending growth.
Overseas data: China inflation (March); Taiwan trade balance (March); Japan machine orders (Feb.); Italy industrial production (Feb.).
Overseas earnings: Alcoa kicks off US second quarter results
“The Reserve Bank of Australia should be applauded for resuming its attempts to talk down the dollar as the evolution of the currency will have a crucial influence on the outlook for both economic growth and underlying inflation. It’s even more important when the latest activity data suggest that domestic demand eased in the first quarter,” say Capital Economics editor Paul Dales. “We believe that the US Fed will change its tune later in the year and raise interest rates at a faster rate than the markets currently expect. That should play a large role in weakening the Australian dollar back to US$0.70 or below. But the damage to the Australian economy from a stronger dollar may have been done in the meantime. As such, the RBA may yet have to back up its words with actions and cut interest rates again.”
The yen fell on Friday after Japanese Finance Minister Taro Aso said rapid currency movements are undesirable and action will be taken as needed. Chief Cabinet Secretary Yoshihide Suga and Bank of Japan Governor Haruhiko Kuroda said this week that they are watching currency markets and will act as necessary.
Bank of America Merrill Lynch strategist Shusuke Yamada, who predicts the yen could climb another 8 per cent this year, says 105 is the level at which policy makers would consider stepping in to sell. The yen was little changed at 108.16 per US dollar on Friday after surging to 107.67 the previous session, its strongest level since October 2014. Despite Friday’s pullback, the currency advanced more than 3.2 per cent last week as the Fed’s dovish approach to US interest-rate policy weighs on the greenback and traders speculate that Japanese officials are reluctant to intervene in the market.
West Texas Intermediate crude rallied 6.6 per cent to $US39.72 a barrel in New York on Friday, the biggest jump since February 12. Speculation has returned that Russia and OPEC members can reach a deal on freezing oil output when they meet in Doha on April 17. Saudi Arabia has said it will only agree if it’s joined by other suppliers including Iran, while Kuwait said a deal can be done without Iran’s support. An unexpected drop in US crude inventories in data last week also helped crude’s recovery.
Three-month copper on the London Metal Exchange closed unchanged at $US4650 a tonne, still near a six-week low hit in the previous session, when it slumped 2.8 per cent in the biggest daily loss since September. LME copper fell 3.6 per cent this week, the biggest since the week of January 8, and has erased all its gains so far this year. “Risk-off (sentiment) has weighed on cyclical commodity markets,” Julius Baer analyst Carsten Menke said. “Copper supplies are set to remain ample as producers are focusing on cutting costs rather than production.”
Rising stockpiles of metal at exchanges have fanned jitters about demand, compounding the impact of souring sentiment in broader markets. Shanghai Futures Exchange copper edged off intraday lows of 35,890 yuan ($US5534) a tonne, but was still down 2.3 per cent. SHFE exchange stocks hit a record just shy of 400,000 tonnes in mid March. Fuelling concerns China will ramp up exports to global markets given a domestic oversupply, copper shipments into Singapore jumped 4800 tonnes, the latest LME data showed.
US stocks edged higher, with the Standard & Poor’s 500 Index trimming the worst weekly slide in two months, as a surge in crude that boosted energy shares offset a slump in biotechnology shares.
The S&P 500 climbed 0.2 per cent to 2047.63 at 4pm in New York, remaining in a range it’s held since the Federal Reserve’s last policy meeting on March 16. The index rose as much as 0.9 per cent Friday, and closed down 1.2 per cent in the week, the most since February 5. Equities have swung between gains and losses in the five days as investors search for clues on the strength of the American economy ahead of what is forecast to be the worst earnings season since the financial crisis.
“You still have a lot of uncertainty surrounding earnings,” said Peter Jankovskis, who helps oversee $US1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments. “There was definitely a risk off trade yesterday. People don’t want to jump in and take a big position either way in front of an earnings number that people expect to be down.”
Lenders and energy producers helped lift European equities from their lowest levels since February, giving some respite to traders witnessing the longest stretch of weekly declines since 2014.
With a 1.2 per cent advance, the Stoxx Europe 600 Index pared a fourth week of slides. Almost all of its industry groups rose on Friday, with Italian banks leading the industry to its biggest gain in almost a month. Energy and commodity producers rallied more than 3 per cent as groups as oil extended a weekly jump.
“Markets are so unpredictable right now – there are risk-on days and there are times when everyone exaggerates the negatives,” said Dirk Thiels, head of investment management at KBC Asset Management in Brussels. “Maybe a better earnings season can change that, but right now you don’t need a lot for markets to get nervous.”
A Bank of America Merrill Lynch measure of financial stress is heading for its biggest weekly advance since February, reaching levels not seen in almost a month. European auto makers, miners and banks – among the industries that led the last rebound – were the ones hit the most this week.
What happened on Friday
Australian shares lost ground over the week as concerns over the global economy prompted a wave of broad-based selling and investors continued to dump the big banks.
All sectors finished in the red with the exception of the more defensive health and utility stocks, dragging the benchmark S&P/ASX 200 down 1.2 per cent for the week to 4937.6, including a 0.5 per cent drop on Friday. That consigned the index to its third straight week of losses.
The broader All Ordinaries fell 0.5 per cent on Friday and 1.1 per cent for the week to 5018.2.