Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD ticked down a bit and U.S. 10‑year Treasury yields dipped by roughly 1bp to 2.34% following the FOMC September meeting minutes. The minutes indicate the FOMC remains in no rush to speed‑up the pace of Fed funds rate increases, meaning U.S. interest rate expectations will not adjust higher. According to the minutes “many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent, and it was noted that some patience in removing policy accommodation while assessing trends in inflation was warranted”.
  • Nevertheless, the minutes reinforce the case for a December Fed funds rate hike which is USD supportive. According to the minutes “many participants thought that another increase in the target range later this year was likely to be warranted”. December Fed funds futures already imply an 80% probability of a 25bps Fed funds rate increase.
  • AUD/USD consolidated within a tight range overnight. The IMF’s more upbeat global economic outlook bodes well for commodity prices and AUD. We don’t expect much reaction in AUD from today’s Australian August housing finance data. Overall, we still expect AUD/USD to trade closer to 0.8000 by year‑end. Australia’s higher terms‑of‑trade, the structural improvement in Australia’s current account deficit, and positive real interest rates spread between Australia and the U.S. favour a higher AUD/USD.

 

Overnight Data:

  • The US MBA mortgage finance applications fell for a fourth consecutive week.  Applications were down 2.1% for the week ended October 6.  Job openings and labour turnover (JOLTS) data rose by 6,082 in August from a revised 6,140 in July, remaining around the highest level since 2000.

 

Global Equity Markets:                                                                                                                   

  • European share markets were mixed on Wednesday, led by the Spanish IBEX index which increased by 1.3% as concerns about Catalonian independence receded.  Elsewhere, shares of GEA Group rose by 5.8% after hedge fund Elliott announced a stake in the German food processing machinery firm.  The STOXX 600 was flat, the German Dax rose by 0.2%, while the UK FTSE fell by 0.1%.  In London trade, shares in Rio Tinto fell by 1.1% and BHP fell by 2.1%.
  • US share markets rose on Wednesday, with key indexes hitting fresh record highs. Johnson & Johnson rose by around 2% after broker Jefferies upgraded the stock to “buy” citing improving profitability in its pharmaceutical division. Investor focus will now shift to major banks JPMorgan Chase and Citigroup, which report results on Thursday. The Dow Jones rose by 42 points or 0.2%, the S&P 500 rose by 0.2% and the Nasdaq increased by 16 points higher or 0.3%.

 

Commodities:                                                                                         

  • Global oil prices increased on Wednesday. OPEC boosted crude oil demand estimates for this year and 2018 amid a strengthening global economy and a weaker outlook for supplies. Kurdistan tensions also supported prices. Brent crude rose by US33 cents or 0.6% to US$56.94 a barrel. US Nymex rose by US38 cents to US$51.30 a barrel.
  • Base metal prices were mixed on the London Metals Exchange. Copper, nickel and tin all rose by 0.7%. But zinc (‑1.7%) and aluminium (‑1.6%) both declined.  The gold futures price fell by US$4.90 to $1288.90.  The spot price was trading around US$1,293 an ounce in late US trade. Iron ore fell by US$1.30 or 2.2% to US$57.80 a tonne.

 

Ahead:

  • In Australia, the monthly housing finance data is released, along with credit and debit card lending data.
  • In the US, producer prices are released with the weekly claims for unemployment insurance claims (jobless claims).

 

Indicative Rates (Bank to Sell):

AUD / USD 0.7740 AUD / CAD 0.9569 USD / JPY 112.48
AUD / JPY 86.69 AUD / THB 24.94 GBP / USD 1.3224
AUD / EUR 0.6509 AUD / HKD 5.9834 NZD / USD 0.7089
AUD / GBP 0.5829 AUD / SGD 1.0470 NZD / EUR 0.5976
AUD / NZD 1.0905 AUD / FJD 1.5873 AUD / CNY 5.1000
AUD / CHF 0.7383 AUD / PGK 2.4537 All Ordinaries 5840.80
AUD / DKK 4.8348 EUR / USD 1.1713 Gold $US/oz 1291.90
AUD / SEK 6.2138 EUR / GBP 0.8971 Oil WTC $/b 51.25

 

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This Freightplus article contains information obtained from sources believed to be reliable and has been prepared in good faith and with all reasonable care. Freightplus makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this website.

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