t’s been another big day for US stock markets with the Dow and S&P both posting 1% gains and calling off recent seasonal weakness. The big driver today was a very strong new home sales report that saw sales jump 165 from a month ago, another sign that the US economy has really picked up into the spring. This news adds to the case for a more hawkish Fed and the potential for an interest rate increase in June. While the street initially saw a rate hike as a negative with fast money players upset about their liquidity parting ending, investors are now seeing it as a positive sign of confidence in a strong domestic economy and a brighter outlook for corporate earnings.
Gold took a big tumble lowing $20.00/oz at one point, in addition to the more hawkish Fed outlook boosting USD, talk of a more robust economy appears to be encouraging capital to leave defensive havens and go back into risk markets like stocks. Crude oil held steady ahead of US inventory reports. The spread between WTI and Brent has collapsed to a couple of pennies which suggests that both may struggle with the big $50.00 round number psychological barrier.
It’s also been a big day for Canada with the S&P/TSX Composite bumping up against the 14,000 round number gains in consumer discretionary and financials. Banks have been particularly strong ahead of their earnings week which starts tomorrow. Bank stocks at or near trend highs indicates high expectations but there’s still a question of what their exposure to the struggling oil sector could mean after National Bank warned a couple of weeks ago.
Wednesday also brings a Bank of Canada interest rate decision. While the street is expecting the bank to remain on hold again, I think there’s a small maybe 10% chance of a cut to help the economy through the short-term turmoil and rough patch brought on by the Alberta wildfires, oil sands production stoppages and Fort McMurray evacuation. A surprise cut could send the loonie lower but either way, we could see CAD remain active through the decision.
Today brings trade data for New Zealand and GDP data for Singapore so we could see some activity in NZD and SGD today along with national indices. Tomorrow three Fed speakers and more US data could keep the FOMC speculation pot boiling.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US new home sales 619K vs street 523K
US Richmond Fed (1) vs street 8 vs previous 14
Germany GDP 1.2% as expected
Germany exports/quarter 1.0% vs street 0.5%
Germany ZEW current 53.1 vs street 49.0
Germany ZEW expectations 6.4 vs previous 11.2
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
4:30 pm EDT US API crude oil inventories
8:45 am AEST NZ trade balance street $25M
10:00 am AEST Singapore GDP street 1.9%
9:00 am BST Germany IFO bus climate street 106.8
9:00 am BST Germany IFO current street 113.3
9:00 am BST Germany IFO expectations street 100.8
8:30 am EDT US advance goods trade bal street ($60.0B)
9:00 am EDT US FHFA house price index street 0.5%
9:45 am EDT US flash service PMI street 53.0
10:00 am EDT Bank of Canada interest rate 0.50% no change expected
10:30 am EDT US DOE crude oil inventories street (2.0 mmbbls)
10:30 am EDT US DOE gasoline inventories street (0.5 mmbbls)
9:00 am EDT FOMC Harker speaking
11:40 am EDT FOMC Kashkari speaking
2:00 pm EDT FOMC Kaplan speaking
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