The escalating global trade dispute again dominated overnight market action. Although European and non-tech-US shares rose, bonds continued their rally and oil markets slipped further. Data releases were mixed, although manufacturing indices in the UK and the US disappointed. US dollar weakness featured, and gold and the Japanese yen rose as markets continued to tilt to safety.

The clouded economic outlook is pushing interest rate markets to reflect a higher probability of deeper interest rate cuts from central banks around the globe. This in turn is supporting asset prices despite diminishing growth forecasts. Futures markets are pointing to modest opening gains for stocks across the Asia Pacific region.

The relatively benign overnight trading has Australian traders focussed on April retail sales data (f/c +0.2%) due this morning and a potential interest rate cut from the RBA this afternoon. There is almost universal agreement that among economists that Governor Lowe will announce a 0.25% cut in the cash rate. The consensus means a muted market reaction is likely. However  if the RBA doesn’t move there is significant potential for shares to drop and the Australian dollar to rise.