Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • AUD/USD recovered overnight.  A firmer NZD has helped support AUD and China’s favourable trade backdrop remains a good source of support for AUD. China’s imports from Australia surged by 25%pa to $8 billion in October (equal to China’s imports from Germany). In our view, favourable global economic activity will continue to bode well for commodity prices and underpin AUD. We don’t expect much reaction in AUD from today’s Australian September housing finance data (11:30am Sydney). Technically, AUD/USD needs to sustain a break above its 200‑day moving average (0.7700) to gain upside momentum. Tomorrow the RBA deliver their quarterly Statement on Monetary Policy.
  • USD consolidated overnight and US 10‑year Treasury yields were largely unchanged near 2.32%. Speculation that some Republican Senators want to materially re-shape the Republican House members tax bill, including delaying the corporate tax cut until 2019, is capping USD strength. The Senate Finance Committee is expected to unveil their tax plan on Thursday (Friday, Sydney time). However, we caution it is not unusual for the Senate and the House to have different tax plans. It will take time for a consensus to be formed into one single tax bill that passes both the Senate and the House.

 

Overnight Data:

  • US new mortgage applications were broadly unchanged last week with purchases up 0.5% and refinancing down 0.5%.  Chinese exports in October were up by 6.9% on a year ago (forecast +7.2%) with imports up 17.2% (forecast +16%).
  • In New Zealand, the RBNZ left the cash rate (OCR) at 1.75%, as widely expected.

 

Global Equity Markets:                                                                                                                  

  • European sharemarkets ended mixed on Wednesday with financials and the automobile sector the biggest drags on key indexes.  Two‑thirds of the earnings season has been completed and earnings for MSCI Europe were up 5.9% on a year ago according to Thomson Reuters data.  The pan‑European STOXX 600 index fell by 0.1%.  The German DAX rose by less than 0.1% and the UK FTSE rose by 0.2%.  In London trade, shares in Rio Tinto rose by 1.1% and BHP rose 1.4%.
  • US sharemarkets were flat on Wednesday.  There were growing doubts about the Republican tax plan, notably whether the plan may need to be watered down for it to pass Congress.  Financials were generally weaker but tech stocks were supported by a 1.7% rise in the shares of Qualcomm.  With an hour of trade to go, the Dow Jones was up by 3 points or less than 0.1%.  The S&P 500 was up by 0.1% and the Nasdaq lifted by 19 points or 0.3%.

 

Commodities:                                                                                         

  • Global oil prices were lower again on Wednesday in response to data showing higher US oil supplies in the latest week.  US crude production rose to 9.6 million barrels per day during the past week, the most in a week on record according to the Energy Information Administration in data going back to 1983.  Crude stocks rose by 2.2 million barrels over the week.  Brent crude fell by US20 cents or 0.3% to US$63.49 a barrel.  US Nymex fell by US39 cents or 0.7% to US$56.81 a barrel.
  • Base metal prices were generally firmer on the London Metals Exchange on Wednesday with prices up between 0.4‑1.1%.  But tin lost 0.3% and aluminium lost 1.1%.  The gold futures price rose by US$7.90 or 0.6% to $1,283.70 an ounce.  The spot gold price was trading around US$1,282 an ounce in late US trade.  Iron ore rose by US20 cents or 0.3% to US$62.50 a tonne.

 

Ahead: 

  • In Australia, housing finance data is released.
  • US data on new claims for unemployment insurance and wholesale sales are due.
  • China’s October inflation data is due.

 

Indicative Rates (Bank to Sell):

AUD / USD 0.7631 AUD / CAD 0.9633 USD / JPY 113.87
AUD / JPY 86.50 AUD / THB 24.52 GBP / USD 1.3120
AUD / EUR 0.6563 AUD / HKD 5.8886 NZD / USD 0.6967
AUD / GBP 0.5791 AUD / SGD 1.0377 NZD / EUR 0.6008
AUD / NZD 1.0936 AUD / FJD 1.5828 AUD / CNY 5.0573
AUD / CHF 0.7481 AUD / PGK 2.4168 All Ordinaries 6089.15
AUD / DKK 4.8746 EUR / USD 1.1447 Gold $US/oz 1280.97
AUD / SEK 6.3793 EUR / GBP 0.8839 Oil WTC $/b 56.77

 

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