20 April 2017. Daily Market Updates

Headlines – International
Australia is caught in a disconnect between the trajectory of its key commodity export and a currency that refuses to follow suit, constricting an economy that policy makers are trying to stimulate.Iron ore has slumped 30 percent since Chinese Premier Li Keqiang signaled plans March 5 to cut his nation’s steel capacity; the world’s No. 2 economy is Australia’s biggest trading partner and iron ore exports account for more than 3 percent of gross domestic product Down Under. The Aussie dollar, meanwhile, has barely budged in the past month as it trades around the 75 U.S. cent mark.
ECB Officials Inch toward the day to talk about ending stimulus Executive Board members Coeure and Praet agreed that the euro-area recovery has become broad-based, while diverging on whether the risks are still skewed to the downside.
Fed’s Fischer Says Downside Risks Abroad ‘Noticeably Smaller’ Brexit hasn’t resulted in significant financial disruption so far, China’s economy appears to be on more solid footing, and unemployment has fallen steadily in Europe, Fed Vice Chair Fischer said.
The economy continued to grow across the U.S. at a modest-to-moderate pace in recent weeks as a tight labor market helped broaden wage gains, though consumer spending was mixed, a Federal Reserve survey showed Wednesday.The central bank’s Beige Book economic report, based on anecdotal information collected by regional Fed banks covering mid-February through the end of March, showed that household purchases outside of automobiles were softer even as Americans were gaining more wherewithal for future spending.
Traders are pulling back from bets the Federal Reserve will raise interest rates in June as inflation expectations crumble.The odds of a hike have fallen back to about 44 percent from more than 60 percent earlier this month, based on a gauge compiled by Bloomberg. Yields on federal funds futures contracts for June and July are retreating as investors scale back forecasts for a move. Two-year Treasuries, among the most sensitive to Fed policy expectations, are poised for their first two-month rally in a year.
Laurence D. Fink, chief executive officer of BlackRock Inc., said the lackluster growth of the U.S. economy and uncertainty around the Trump administration’s ability to quickly pass key reforms pose a risk to markets. “There are some warning signs that are getting darker,” said Fink, in an interview Wednesday on Bloomberg Television. Fink, who runs the world’s largest money manager, mentioned a pullback in car sales and a slowdown in merger and acquisition activity as indications that uncertainty is rising. The slowest economy among the G-7 nations is the U.S., he said.
Oil-producing nations are moving closer toward ending a global glut and re-balancing the crude market, and OPEC will decide next month whether to extend its cuts in output beyond June, the group’s Secretary-General Mohammad Barkindo said. OPEC’s compliance with the pledged cuts improved to 104 percent in March from 90 percent in February, while the rate for non-OPEC producers in the accord rose to 64 percent from 38 percent over the same two months, the International Energy Agency said in an April 13 report. OPEC’s average compliance for 2017 is 99 percent, the IEA said.
Exchange-traded funds are making stock markets dumber and more expensive. That’s the finding of researchers at Stanford University, Emory University and the Interdisciplinary Center of Herzliya in Israel. They’ve uncovered evidence that higher ownership of individual stocks by ETFs widens the bid-ask spreads in those shares, making them more expensive to trade and therefore less attractive.
Currency Traders Spot fatal flaw in Republicans’ Border Tax Plan. In Washington D.C., one of the selling points of an ambitious border-tax plan rests on a key economic assumption: The dollar will appreciate enough to offset any increase in the cost of cheap, imported goods that so many Americans have come to rely on. But on Wall Street, traders and strategists who make a living in the $5.1-trillion-a-day currency market say such notions are preposterous. Even if congressional Republicans can set aside their differences to pass the proposed border-adjusted tax — a prospect that seems more remote with each passing day — you’d be hard-pressed to find anyone in the market who believes it will result in the greenback strengthening 25 percent, as the plan suggests.

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FX :
The Bloomberg Dollar Spot Index rose 0.4 percent, most since March 2.
The yen dropped 0.4 percent to 108.86 per dollar after gaining 0.5 percent Tuesday.
The AUD fell below 0.7500 amid weak commodity prices and USD strength as safe haven currencies gained
The pound fell 0.5 percent to $1.2783 after surging 2.2 percent a day earlier on May’s call for an election. The euro was little changed at $1.0726.
The yield on 10-year Treasuries rose four basis points to 2.21 percent after an eight-basis-point plunge Tuesday.
The yield on German notes due in a decade also increased five basis points to 0.20 percent.
Australia’s 3-year yield rises 3bps to 1.78%; 10-year yield advances 5bps to 2.50%
Australia to Sell A$500.0m 126-Day Bills today
Equities :
The S&P 500 fell 0.2 percent to 2,338.17 at 4 p.m. in New York. The index erased gains as energy shares turned lower following government data that sent crude lower.
The Dow closed at the lowest since Feb. 10, Goldman is the latest of the big banks to announce meeting better earnings.
The Stoxx Europe 600 increased 0.2 percent after dropping 1.1 percent on Tuesday.
Commodities :
Gold futures declined 1 percent to $1,281.50 an ounce after closing at the highest since November in the previous session.
West Texas Intermediate crude oil dropped 3.5 percent to $50.57 a barrel in New York.
Gasoline inventories rose 1.54 million barrels last week, surprising analysts surveyed by Bloomberg who projected the Energy Information Administration data would show a 2-million-barrel decline. Crude inventories fell 1.03 million barrels to 532.3 million last week.

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