News & Analysis

Global stocks & risk Currencies bounce back as Italian concerns ease for now; Dow – EUR – Oil post solid gains

May 31, 2018 | Daily Market Outlook

Upcoming high impact news:

11:30 AUD Private Capital Expenditure
22:30 CAD GDP
01:00 OIL Crude Oil Inventories
02:45 USD FOMC Member Bostic Speaks – 03:00 USD FOMC Member Brainard Speaks (med -Impact)

US markets – rebounded on Wednesday as credit and political concerns in Italy looked to be easing. After a regular Italian bond auction proved better than feared. The Stoxx Europe 600 traded flat, while Italy’s FTSE MIB rallied 1.7 percent. News that Italy’s interim prime minister, who had been appointed by President Sergio Mattarella, said possibilities had surfaced “for the birth of a political government,” this gave global markets some stability after days of uncertainty.

Last night’s U.S data missed came in lower than expected. Hiring; ADP Non-Farm Employment Change came in at 178K missing market expectations of 191K. Prelim GDP fell to 2.2% missing market expectations of 2.3%.

Key indexes closed higher; the Dow Jones +306.33 points – the S&P500 +34.15 and the NASDAQ closed 65.86 points higher.

Europe – ended trade mainly higher, the FTSE added 56.93 points, the DAX added 117.25 points but the CAC failed to see a recovery-ending the session 10.70 points lower. The key focus continued to be what was unfolding in Italy. Easing worries over credit and the political situations gave buyers the green light. In data news, German CPI jumped to 2.2% in May. Moving above the European Union’s target figure of 2%.

Stock wise, British discount retailer B&M reported a 25 percent rise in full-year profit, shares closed 4.5 percent higher. Germanys Bayer rose almost 4 percent as trader’s monitored news that the U.S. Department of Justice has cleared the way for approval of its $66 billion acquisition of Monsanto.

Oil – jumped adding 2.2% overnight. USOUSD added 135 cents closing at $68.13. Saudi Arabia, other OPEC states and non-OPEC allies aim to stick to a global pact on cutting oil supplies until the end of 2018, a Gulf sources told Reuters. “It seems that somebody in the central bank is taking notice of the big drop in oil prices and sending a signal of, ‘Hey, wait a second. We don’t want these prices to fall too far — that could pose a risk to the Russian economy”‘ said Phil Flynn, an analyst at Price Futures Group in Chicago.

Traders U.S output still remains a key issue in the market, tomorrow morning U.S crude inventories will be released. The market is expecting -0.4M.

Forex – in polar opposites from Tuesday where everything was working against the EUR, Wednesday was a real turn around, concerns in Italy abated and German CPI increasing to 2.2% cleared the way for strong buying. The EUR jumped back to the majors, adding 129 to the USD, 151 to the JPY and 68 pips to the GBP. The Aussie also surged adding 66 pips the USD and eclipsing two days of losses in a single session. The GBP increased to the USD and JPY but gains were tame compared to other risk currencies. The USDCAD dived as the USD retreated and the BOC held rates at 1.25%. The Central bank’s statement was a lot more hawkish suggesting a path for rate rises in the second half of the year. The U/C plunged closing 142 pips lower.

Gold shifted, after dropping in the London session buyers returned sending price $3.23 higher to a very weak USD. Bitcoin retreated losing close to 100 USD in value. Price is trading higher this morning. We would like to see 7190 continue to offer buyers support.

Good trading from Eightcap.

Sources; CNBC All times are AEST

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