News & Analysis

Dow tops 25K – NASDAQ fresh records; Stockpile figures hurt Crude; ECB QE talk boosts EUR – GDP beat lifts AUD

Jun 7, 2018 | Daily Market Outlook

Upcoming high impact news:

11:30 AUD Trade Balance
01:15 CAD BOC Gov Poloz Speaks

A strong night for U.S stocks, banking stocks and tech leading the gains. Tech helped the Nasdaq make new records but gains where capped after the Financial Times reported the European Union was set to unveil a negative finding from a probe on Google. Shares of Google-parent Alphabet closed 0.4 % lower on the news. J.P. Morgan Chase, Bank of America and Morgan Stanley all rose more than 2 %, while Goldman Sachs advanced 1.7 %. The SPDR S&P Bank exchange-traded fund (KBE) gained 2.1 %, marking its best day since March 26.

Tariffs and counter tariffs continue to remain an issue but were ignored by traders in last nights session. Mexico unveiled tariffs on Tuesday that target U.S. goods such as pork, cheese and steel. Canada’s Chrystia Freeland said the country plans to slap dollar-for-dollar tariffs on the U.S. Meanwhile, the EU threatened to retaliate with tariffs of its own.

The Dow had a strong session adding 346.21 pts breaking back above 25,000 for the first time since May. The S&P500 added 23.55 and the Nasdaq made fresh records during the session, closing 51.38 pts higher.

European shares closed mainly higher, ECB and Italy key focuses last night. ECB Chief Economist Peter Praet said the bank will discuss next week how to wind down its 30 billion euro monthly-purchase program. New Italian Prime Minister Giuseppe Conte presented his coalition’s plans to crackdown on immigration and up welfare spending while cutting taxes on Tuesday.

RPC Group had a shocking session plummeting almost 12% after announcing the sale of several non-core assets.

The EUROSTOXX600 ended -0.01 lower, the DAX added 42.94 and the FTSE closed 25.57 higher.

Oils recovery took a hit last night as US stockpiles showed a shock increase. This sent USOUSD price 121 cents lower during the session. U.S. crude inventories rose 2.1 million barrels in the week to June 1, the Energy Information Administration said, fuel inventories also increasing. EIA also said U.S. crude output hit a record of 10.8 million barrels a day in the week. Output continues to remain on the radar, OPEC and Russia will meet on June 22 to decide whether to increase production following a fall in global inventories as world demand outstrips supply.

The USD traded mainly lower, risk closed higher. The USD did add 40 pips to the Yen and fought back from a 70 pips loss to the CAD. Oil weakness hit CAD confidence post US inventories. The EUR continued its rally adding 56 to the USD and 108 pips to the Yen. The Euro was driven by central bank news that the ECB will discuss unwinding QE this month.

Germany’s central bank head said market expectations for an end to bond-buying this year were plausible.

“The notion that the ECB could end stimulus sooner rather than later is a boon for the euro as it suggests an earlier arrival of an eventual rate hike from rock-bottom levels,” said Joe Manimbo, a senior market analyst at Western Union Business Solutions in Washington.

Better than expected GDP data continued the AUDs good run, the Australian economy expanded by 1% in the first three months beating 0.9% market expectations. This morning the data continues with the trade balance being released at 11:30 am. The AUD ended 52 pips higher to the USD and 88 pips higher to the Yen.

Good trading from Eightcap.

Sources; CNBC All times are AEST

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