U.S. cash markets were closed for a public holiday on Monday, while equity futures rose alongside European equities.
The S&P500 e-mini futures gained +1.10% on Monday along with contracts on the Dow Jones +0.93% and Nasdaq 100 +1.10%. The moves following weakness last week which has pushed indices to levels considered oversold on a short-term technical basis which is often followed by a corrective bounce. Wall Street analysts remain mixed in their view for the next move in equities with JP Morgan strategist saying pressure should ease with inflation expected to moderate, while Morgan Stanley analysts cautioned that more losses could be in store citing growing evidence of an economic slowdown and inflation dynamics unlikely to roll over before Q4.
In Europe, the Euro Stoxx 600 gained +0.96% along with the DAX +1.06% and FTSE100 +1.50% while France’s CAC lagged +0.64% after Emmanuel Macron’s party failed to gain an absolute majority in parliamentary elections, although still won the most seats. ECB Central Bank President Christine Lagarde on Monday reaffirmed plans to increase interest rates twice over the summer while addressing widening spreads in borrowing costs of different eurozone countries. There was no key economic data to guide markets overnight, with 10-year government bond yields across Europe generally rising between +3.8 basis points in Switzerland to +12.3 in Italy, the exception was Sweden where the yield declined -13.2 basis points. The Euro edged +0.10% higher to 1.0510 along with the Pound +0.07% to 1.2249 and there is no key data for the region on Tuesday.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set to open higher this morning with ASX200 futures up +51 points or +0.80% to 6,392. The index declined -0.64% on Monday weighed by a drop in both materials -4.65% and energy -5.19% as the price of base metals and oil fell over concerns that a global recession will ultimately curb demand. Energy stocks slumped following large declines in oil on Friday with BPT down -8.4% along with STO -6% and WDS -4.9% while BHP declined -5.3% along with RIO -5.1%, FMG -8.6% and CIA -11.9% after iron ore futures in China tumbled. Other sectors rebounded after the ASX suffered its worst week last week since the pandemic with real estate +3.50%, consumer discretionary +2.77%, health care +2.42% and industrials +1.32% leading gains. In focus today in a speech by RBA Governor Philip Lowe at 10:00 AEDT followed by the release of the RBA policy minutes for June at 10:30 AEDT. The Australian dollar is +0.27% higher overnight at 0.6951 while the 10-year yield declined -6.1 basis points on Monday to 4.069%.
Oil prices rebounded after Friday’s weakness with both WTI and Brent crude +0.65% and +0.89% higher at US$110.27 and US$114.13 a barrel. ANZ Commodity strategist Daniel Dynes said it a note that while there is “a lot of concern about the economic backdrop with further rate hikes, but what the fundamentals are suggesting at the moment is that oil is a very tight market with supply-side issues, which we don’t think will lead to end soon” forecasting Brent crude to finish at US$125 by year-end. Iron ore futures in Singapore declined -7.57% on Friday although are +0.82% higher this morning at US$111.85. Futures in Dalian hit their 11% limit down on Monday over fears of a collapse in steel consumption in China amid struggles to contain recent COVID-19 outbreaks and rising steel inventories following sluggish demand. Gold was little changed at US$1,838.74 an oz overnight while silver rose +0.34% to US$21.75 and Bitcoin was -0.87% lower at US$20,427.
Economic data:
- RBA Governor Lowe Speech 10:00
- RBA Policy Minutes 10:30
- Chicago Fed National Activity Index (MoM May) 22:30
- U.S. Existing Home Sales (MoM May) 00:00
- Fed Barkin Speech 01:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
