Australian shares are set to open steady after markets rallied, but there is plenty of economic data to come this week and not all of it is promising.
The Reserve Bank of Australia meets on Tuesday to kick off. Shane Oliver of AMP Capital writes that the minutes from the board meeting are unlikely to say anything new.
“But a speech by RBA Governor Philip Lowe also on Tuesday may shed more light on how the bank is seeing the impact of the shutdown and whether it sees the need to do more. One area where the RBA could do more is to extend its bond buying to corporate bonds to get the corporate bond market working again,” he said.
“On the data front new ABS publications to track the economic impact of coronavirus on the economy will shed light on the impact on households [Monday] and weekly payrolls and wages [Tuesday] and preliminary retail sales data for March [Wednesday] are likely to show a sharp decline. Skilled vacancies for March [Wednesday] will likely show a sharp fall.”
Economic data from the US is also expected to continue in a downward spiral.
Stephen Innes from AxiTrader said: “PMI may be the key, as their PMI numbers held up comparatively well relative to Europe in March. Their composite PMI only fell to 40.9, which was some way above the Euro Area’s composite reading of 29.7.
“The question will be whether the US data will converge to the low end of the spectrum as US states issued stay-at-home orders in late March and early April, the effects of which will be picked up by this month’s surveys.”
There is also the fear that the challenges of the pandemic will distort the data.
“We have several different types of policies all bundled together, and we’re going to be looking for insights as to which of these policies are working and which ones to reinforce,” said Tara Sinclair, a senior fellow at Indeed Hiring Lab and a George Washington University economist who studies business cycles. “The shutting down of large parts of the economy was not anticipated in the construction of our economic statistics.”
Local: Retail sales March; NZ CPI Q1
Overseas data: UK Rightmove house prices April; Chicago Fed Nat Act Mar; Eurozone trade balance February
ASX futures steady at 5464 points or +0.2% 9.54pm Saturday AEST.
- AUD -0.6% to 63.64 US cents
- On Wall St: Dow +3% S&P 500 +2.7% Nasdaq +1.4%
- In New York: BHP +3.6% Rio +2.5% Atlassian 3.9%
- In Europe: Stoxx 50 +2.7% FTSE +2.8% CAC +3.4% DAX +3.1%
- Spot gold -2% to $US1682.82 an ounce
- Brent crude +0.9% to $US28.08 a barrel
- US oil -8% to $US18.27 a barrel
- Iron ore +0.9% to $US86.17 a tonne
- Dalian iron ore +1.3% to 612 yuan
- LME aluminium -0.4% to $US1506.50 a tonne
- LME copper +1.4% to $US5212 a tonne
- 10-year yield: US 0.64% Australia 0.85% Germany -0.48%
From today’s Financial Review
‘Only fair’: Facebook, Google ordered to pay up on news: Facebook and Google will be forced by the federal government to pay Australian media companies for publishing their news stories under a world-first mandatory code of conduct after negotiations with the two global digital giants failed.
Five weeks that shocked Team Australia to the financial limit: Josh Frydenberg was in Saudi Arabia when the virus drama unfolded with unprecedented force and the nation’s focus shifted from a budget surplus to saving lives and shoring up the economy.
Hostplus pulls $1.5b from property fund in liquidity dash: Hostplus is seeking to withdraw $1.5 billion from one of the country’s biggest property investment funds ahead of what could be an avalanche of requests by out-of-work hospitality and tourism workers for early access to their retirement savings.
US stocks advanced a second straight week as governments began taking baby steps toward reopening their economies and on early signs that science may be gaining on the coronavirus.
The Dow Jones industrial average surged 704.81 points on Friday to finish up 3 per cent after aerospace giant Boeing announced it would resume manufacturing jetliners starting Monday. Boeing shares spiked nearly 15 per cent.
The Standard & Poor’s 500 closed the day up 2.7 per cent and is now 15 percent higher than it was two weeks ago. The Nasdaq composite climbed 1.4 per cent. All 11 stock market sectors were up, with energy and financials leading the way. Shares in Chevron and Exxon Mobile, rose on investor sentiment that a major contraction in oil production will raise prices to the benefit of the biggest, well-capitalised companies.
British shares closed higher on Friday as investors cheered plans for a gradual restarting of the US economy and encouraging data emerged on a possible treatment for COVID-19.
The commodity-heavy FTSE 100 index closed up 2.8 per cent, boosted by oil majors BP and Royal Dutch Shell which added 4 per cent and 5.5 per cent respectively, though on the week the index fell 0.95 per cent.
Miners gained after the world’s top iron ore miner Rio Tinto posted higher-than-expected quarterly production, sending its shares up 3.3 per cent.
UK Chancellor of the Exchequer Rishi Sunak is seeking advice from former banking and hedge fund colleagues as the government grapples with the economic impact of the coronavirus pandemic, the Times of London reported.
Sunak has called on John Sheridan, a partner at London-based hedge fund Theleme Partners, to help the Treasury, the newspaper said. The pair both worked together at billionaire activist manager Chris Hohn’s TCI Fund Management before joining their TCI colleague Patrick Degorce’s Theleme.
In European trading, the CAC 40 in Paris rose 3.4 per cent, while Germany’s DAX climbed 3.1 per cent.
Shares surged in Asia after China reported economic data that, while dismal, was better than expected.
China reported its economy contracted 6.8 per cent in January-March as the country battled the coronavirus. That is the worst performance since at least the late 1970s.
It’s also not as bad as the double-digit declines some analysts had forecast, though the latest numbers suggest the recovery will be a slow one.
“The March data add to broader signs that China’s economy is past the worst. But the recovery will probably continue to underwhelm. Indeed, the high frequency indicators we track suggest that, after an initial bounce as containment measures were eased, the recovery in activity has since slowed to a crawl,” Julian Evans-Pritchard of Capital Economics said in a commentary.
Sterling was stable after sagging to its lowest level in decades in the aftermath of the pandemic. Since then, sterling has recovered by nearly 7 per cent against the euro. It was little changed at 87.05 pence, compared with a low of 0.95 pence on March 19. Against the dollar, the pound had a bumpy ride but was last up by 0.4 per cent at $US1.2503.
The virus has exposed the vulnerability of the euro with French President Emmanuel Macron warning that the European Union could collapse unless it finds a way to share the costs of the crisis.
“EUR’s status might have been evolving since the COVID-19 outbreak but, going forward, we are bearish. This is because we expect European data to decouple further from US data, and that is partly due to the lack of a coordinated European fiscal response – which we remain concerned about,” wrote Bank of America strategists in a note to clients.
Copper rose to a one-month high on Friday on plans for the U.S. economy to re-open and signs of recovery in China’s industrial output, even as growth in the top metals consumer contracted in the first quarter.
Analysts raised concerns about metals demand outside China, where governments have imposed lockdowns to slow the spread of the virus.
“Ultimately, if confidence remains weak in the rest of the world and unemployment rates continue to go up, Chinese exports will be affected and this will reduce demand from the export sector in China and push copper prices lower,” said Anna Stablum, a commodity broker at Marex Spectron.
The ASX topped off a positive week with a gain on Friday, as investors hoped that a treatment for COVID-19 is in sight, the US laid out a path to reopening its economy, and as signs emerged of a tentative rebound in the Chinese economy.
The S&P/ASX 200 ended Friday’s session with a 1.3 per cent, or 71 point gain, to 5487.5. For the past five trading days, the index climbed 5.4 per cent. Up 1.9 per cent for the week, it was the fourth weekly gain for the index and its longest weekly winning streak since September.
Karen Jorritsma at RBC Capital Markets said “light is starting to show at the end of the tunnel” referencing the Trump administration’s plans to reopen the US economy and Chinese industrial production data.