Overnight: Have You Checked The Children?
The Dow closed up less than one point while the S&P lost -2 points to 2425 and the Nasdaq rose 0.3%.
The Turn of the Screw
The value of all Australian housing-related lending rose by 1.3% in May to be 4.6% higher over the year. With that number, there is now a distinct trend of investor loans declining and owner-occupiers moving in to fill the gap, although few are first-time buyers. Tighter APRA regulations on investor loans and interest-only loans are beginning to have an impact.
The number of new loans to owner-occupiers rose by 1.0% to be -3.5% lower year on year, although that number is on the rise. The value of these loans rose 2.9% to be 3.1% higher year on year – reflecting still rising house prices. The value of loans to investors fell -1.4% to still be up 8.1% year on year, but that number is falling.
If there is any concern that the Australian economy may fall into recession if support from the housing market wanes, it is not evident in the views of Australian businesses. NAB’s monthly survey for June showed a gain in the conditions (now) index to 15.1 from 10.9 in May – the highest level since February 2008, which was just before the wheels fell off.
But is it a case of make hay while the sun shines? The confidence (ahead) index also rose in June, but at 9.3, up from 7.5 in May, confidence in the future clearly lags confidence in the present. The results are notable for a long-awaited pick-up in mining state confidence, but the bottom line is this level of contentment is not flowing into increased business investment of any great note. That, presumably, reflects the future-present lag.
One wonders just how much of this comparative lack of confidence relates to the government and its capacity to achieve anything at all meaningful, and ditto for the US, and particularly the guy with the launch codes.
The release of NAB’s survey provided a boost for both the local stock market and the currency early on in yesterday’s session, but a 20 point gain was stymied on the release of the housing finance numbers. Thereafter, the index drifted rather aimlessly to a flattish close. Too much market-moving potential later in the week.
If any theme was evident it was a “reflation trade” session, with the banks and resource sectors finishing alone in the green and the likes of health, telcos and utilities making their contributions in the red.
As if one Donald wasn’t enough
For the same looking-ahead reason, Wall Street had been drifting along doing not a lot early in last night’s session before an email exchange between Donald Trump Jr and a Russian lawyer hit the airwaves, suggesting the Russian government was offering dirt on Hillary. The humans on the trading floor rolled their eyes and were about to go back to chatting about baseball when suddenly the Dow dropped 125 points and other indices followed suit.
The finger was immediately pointed once more at computers – specifically algorithms used by high frequency traders that exploit artificial “intelligence” of sorts to read news reports and tweets and so forth and search for key words that might suggest up/down market movements. The problem is, they are all looking for the same words, so in this case, they all tried to sell at once.
Then we likely saw other algos based on momentum trading kick in to follow the herd and the whole debacle becomes self-fulfilling until the adults step in. Last night they stepped in when the 50-day moving average was hit on the S&P500 and started buying, thus turning the computers on their heels. Repeat process, back the other way. The dip began at about 11am and indices were back to square by noon.
The adults then went back to chatting about baseball. You don’t get much flatter than a 0.55 gain for the Dow at the closing bell.
If the Trump the Younger news had broken earlier this year then perhaps there may have been a more nervous reaction on Wall Street, just as there ultimately was when the whole Donald the Elder vs the FBI director thing blew up and cries of “impeachment!” rang out. But that wobble proved only brief once Wall Street realised that it took six year to impeach Nixon and in that case the evidence was far more incriminating.
Hence Wall Street, in organic form, is not paying any attention to the Russia “scandal”. More important will be tonight’s testimony from Janet Yellen, a big data drop on Friday night and the first quarterly results from the big banks.
Iron ore is now technically in a bull market. Woohoo! The spot price rose US90c to US$64.70/t yesterday and is now 20% off the June lows. Never mind that it nearly hit the ton only a few months ago.
Drag out the chocolate wheel – it’s that time of the week to play US weekly crude inventory bingo. API data for last week has suggested a drawdown, so West Texas crude is up US$1.23 at US$45.78/bbl. The previous week went the opposite way, as did the oil price.
Copper, nickel and zinc all enjoyed rallies of around 1% in London last night, with a little help from an easing in the US dollar index of -0.3% to 95.75.
Gold also found support, to the tune of $3.10 for $1217.20/oz.
The Aussie is 0.4% higher at US$0.7636.
The SPI Overnight closed down -5 points.
Westpac will release its monthly consumer confidence survey locally today.
The Fed Beige Book is out tonight but no one pays much attention to that any more, and particularly not when the woman herself is being grilled by politicians.
Rudi will host Your Money, Your Call tonight on Sky Business, 8-9pm.
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