Australian shares are poised to open higher. Shares in New York were mixed in late trade.
ASX futures were up 9 points or 0.2% to 5314 near 6am AEST; an hour earlier they were up 30 points. The currency rose 0.5% to US64.97¢, earlier rising as high as US65.14¢.
On Wall Street, shares ended lower with the Dow and S&P 500 giving up modest gains during the final hour of trade.
Topping the local agenda is first quarter CPI. Here’s NAB’s preview: “We expect a small 0.3% rise in the Q1 CPI, lifting annual inflation from 1.8% in Q4 to 2.2%, which would be the largest annual increase since 2014.
“The trimmed mean CPI – which is the Reserve Bank’s preferred measure of underlying inflation – is expected to rise by a further 0.4% in Q1, with annual inflation ticking up from 1.6% to 1.7%.”
NAB said its forecast of a slight rise in the CPI may seem surprising given the pandemic and containment measures has seen consumer spending fall sharply around the world, with other advanced economies showing deflation in the month of March.
However, falling prices in March overseas had little impact on inflation in Q1 as a whole, it noted. In Australia, the impact of the coronavirus pandemic and related containment measures escalated in the second half of March. “As such, we expect a limited impact on the Q1 figures.
Instead, the key factors for our Q1 CPI forecast are the strong rise in food prices offsetting a fall in petrol prices and weakness in travel costs.”
Local: First quarter CPI; NZ March trade
Overseas data: Euro zone April economic and consumer confidence, April CPI; US first quarter GDP, pending home sales March, Fed policy meeting statement at 4am AEST Thursday
ASX futures up 9 points or 0.2% to 5314 near 7am AEST
- AUD +0.5% to 64.97 US cents (overnight peak 0.6514)
- On Wall St near 4pm: Dow -0.1% S&P 500 -0.5% Nasdaq -1.4%
- In Europe: Stoxx 50 +1.7% FTSE +1.9% CAC +1.4% DAX +1.3%
- Spot gold -0.4% to $US1706.90 an ounce at 3.05pm New York time
- Brent crude +2.6% to $US20.50 a barrel
- US oil -0.5% to $US12.72 a barrel
- Iron ore -1.5% to $US82.20 a tonne
- Dalian iron ore -1.7% to 594.5 yuan
- LME aluminium -0.2% to $US1504.5 a tonne
- LME copper +0.3% to $US5214 a tonne
- 2-year yield: US 0.21% Australia 0.21%
- 5-year yield: US 0.37% Australia 0.43%
- 10-year yield: US 0.61% Australia 0.92% Germany -0.47%
- US prices as of 4.17pm New York time
From today’s Financial Review
Banks’ loan losses could top $35b: The cost to the big four banks of bankrolling “Team Australia” through the COVID-19 crisis depends largely on the shape of the economic recovery.
Chanticleer: Bank dividends are not annuities: NAB’s decision to pay a dividend while raising capital has sparked plenty of debate, and is a reminder that these payouts are far from guaranteed.
Short sellers target Myer as crisis deepens retailers’ woes: Myer has repeatedly denied suggestions it is planning to go into administration, but that hasn’t stopped short sellers from targeting the stock.
With US coronavirus cases topping 1 million, a predictive model often cited by White House officials showed the outbreak could take more than 74,000 US lives by August, compared with an earlier forecast of 67,000, if the lockdown were to be lifted too early.
“There seems to be a conflict of opinion about the proper course of action,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
“As more insights back the belief that opening up early is not the best course of action right now, because if we do and if we get a relapse, then the next wave could even be worse.”
US consumer confidence tumbled in April as lockdown measures crushed economic activity and left million of Americans unemployed. Domestic first-quarter GDP figures are due Wednesday (Thursday AEST), with economists expecting a contraction of 4%.
Investors are also awaiting the outcome of a two-day Federal Reserve policy meeting, although expectations are low for more central bank easing.
A rally in banking shares helped European shares end at seven-week highs on Tuesday, with further optimism kindled by signs that several economies were starting to ease coronavirus-driven lockdowns.
The pan-European STOXX 600 closed up 1.7% on largely broad-based gains.
A 40% jump in first-quarter profit for UBS, the world’s largest wealth manager, and a 4.2% in Spain’s Santander despite an 82% slump in quarterly net profit lifted Europe’s battered banking sector to its highest point in two weeks.
“We’ve come to a point with regard to European banks where expectations have fallen so much because of the uncertainty, but the earnings look stable excluding the loan loss provisions,” said Craig Erlam, senior market analyst at Oanda.
UK-based HSBC Holdings Plc’s shares rallied 1% but it warned of more earnings pain ahead as it set aside a hefty $US3 billion in bad loan provisions due to the COVID-19 pandemic.
It wasn’t all good news.
British Airways plans to cut as many as 12,000 jobs in response to the coronavirus crisis that means that passenger numbers will take years to recover, its owner International Consolidated Airlines Group said.
IAG, which also owns Iberia, Aer Lingus and Vueling, reported first-quarter operating losses before exceptional items of 535 million euros, compared with a profit of 135 million a year ago. Revenue dropped 13% to 4.6 billion euros.
IAG warned it expects results to get worse in a statement also setting out plans for a sweeping restructuring at BA.
Hong Kong shares on Tuesday climbed to their highest level in more than a week, as the financial hub showed some signs of returning to normalcy with civil servants set to head back into offices after the government eased lockdown restrictions.
At the close of trade, the Hang Seng index was up 1.2% at 24,575.96, having reached its highest level since April 17 during the session. The Hang Seng China Enterprises index gained 1.1%.
“There is a restoration of investor confidence as the economy starts to pick up in activity, which is helpful for equities … the market is benefitting from positive news coming out after bearish sentiment lasted for so long,” said Christy Tan, head of markets strategy for Asia, National Australia Bank.
China’s main Shanghai Composite index closed down 0.2% as corporate earnings loomed, but the blue-chip CSI300 index and the start-up board ended higher on regulatory reform.
In Tokyo, the benchmark Nikkei average slipped 0.1% to close at 19,771.19, a day after the index posted a hefty gain of 2.7% and ahead of the Showa Day holiday on Wednesday.
The Nikkei volatility index, considered a fear gauge based on option pricing, dropped as much as 11.3% to a 1-1/2-month low of 30.9, reflecting a decline in market worries.
TD Securities on what’s happening in FX markets: “G10 FX markets have started to enter a holding pattern ahead of Wednesday’s Fed and Thursday’s ECB meetings — although we are not looking for a surprise from either. Month-end also looms on the horizon while we also have several holidays coming up in several parts of the world.
“Month-end dynamics could leave USD temporarily vulnerable vs EUR & JPY, but the bigger-picture still favors a stronger dollar. Ahead of this, we think EURUSD could remain confined to familiar ranges until these risk events are behind us.”
Bank of America preview of the FOMC statement: “The Fed is likely to maintain rates at the ZLB (0.00-0.25%), but make significant tweaks to its policy statement to signal rates would remain at the ZLB for an extended period of time and that it is committed to using a ‘full range of tools to support the flow of credit’. In addition, we expect the statement to acknowledge the significant deterioration in economic conditions and disinflationary pressures.”
BofA on currency investors: “The FX market will likely take cues more from the Fed’s economic assessment than from program tweaks. A sobering assessment of economic activity by the Fed, as well as by other global central banks this week, could well begin to shift the prevailing focus away from policy stimulus and back to the reality of global recession. We expect a USD rally and renewed risky FX weakness.”
Benchmark copper on the London Metal Exchange was up 0.3% to $US5214 a tonne at 1600 GMT. Prices of the metal used in the power industry and construction touched a six-week high of $US5269 a tonne on Monday, a gain of 20% since the four-year low of $US4371 hit on March 19.
“Copper price gains are premature given the looming possibility of a worldwide recession,” said Commerzbank analyst Eugen Weinberg. “We’ll probably see lower copper prices with the release of data on industrial activity over coming weeks.”
“In the first quarter of 2020, global primary aluminium demand decreased by 6.4% to 14.43 million tonnes,” Russian aluminium producer Rusal said. “In the rest of the world demand dropped by 6.5% to 6.6 million tonnes, while Chinese demand decreased by 6.3% to 7.83 million tonnes.”
Three-month aluminium was down 0.2% at US1504.5 a tonne.
Bank of Nova Scotia (Scotiabank) told staff on Tuesday it would close its metals business, drawing the curtain on one of the most venerable names in precious metals trading, two sources familiar with the matter told Reuters.
Scotia was for years the world’s biggest lender to the physical precious metals industry, with a history stretching to the founding in 1684 of London gold dealer Mocatta Bullion, which it bought in 1997.
Once a global player with more than 100 staff in offices from New York and London to India and Hong Kong, the bank sharply downsized the business in 2018 after a strategic review and an unsuccessful attempt to find a buyer.
But it remains one of the five banks that settle gold trades and one of 12 market makers that provide liquidity in the London market. It is also a participant in daily auctions that set a globally used gold benchmark price.
“Scotia had a global call with all its metals staff and said it was shutting down its metals business,” said one of the sources.
“The plan is to unwind the metals business,” said another.
Data shows full force of COVID-19 market exodus: Investors ripped at least $11.6 billion out of Australian managed funds in March, according to analysis of transactions on the global Calastone network.
ASX closes lower, hurt by slump in oil price: The Australian sharemarket edged lower on Tuesday, wiping some of its gains from the previous session as the price of US oil sunk heavily.
Macquarie’s guide to the best capital raisings: The latest analysis by Macquarie suggests retail investors can benefit from a couple of simple lessons by identifying profitable capital raisings, with a healthy return of 17 per cent.