Global Markets Overview - May 15, 2015

Equities rally on bond stability

A much calmer situation in the bond markets helped equities rebound from recent lacklustre performance. However, I would caution investors against getting too excited about the overnight gains. Trade has been extremely choppy in recent weeks and we are yet to see any sustainable short-term trends. Perhaps the most surprising move was the fact unemployment claims dropped by more than expected to their lowest since April 2000 but the USD remained somewhat on the back foot. This could have been because the PPI reading fell well short of expectations.

The greenback lost further ground to the euro and sterling but managed to recover against commodity currencies such as the AUD and CAD. Comments by ECB President Mario Draghi really drove sentiment in European trade after reinforcing the belief the central bank will carry out the QE program in full.

This helped bond markets settle down and saw equities rally. Draghi said that, even if data improves, what matters is to see an equivalent effect on investment, consumption and inflation. These comments appeased investors who were growing wary that the ECB may pull the QE pin early.

AUD gives up some ground

A weaker USD played against the ASX 200 and the Nikkei yesterday. Given the greenback has recovered some ground against the AUD and yen, it’ll be interesting to see if this will support equities in the two countries today.

We are currently calling the Nikkei up around 0.7% and, apart from BoJ Governor Haruhiko Kuroda’s speech, there isn’t a lot else to look out for. AUD/USD has dropped back below $0.8100 but the short term momentum remains bullish. We might continue to see consolidation above $0.8000 in the near term and that’ll make the situation very interesting on the monetary policy side of things.

There is no data at all locally and the next key event for the AUD will be Tuesday’s monetary policy meeting minutes. However, these may prove to be stale given we’ve since had the Federal Budget presenting a curler.

Firmer open for ASX 200

Ahead of the local market open we are calling the ASX 200 up 0.5% at 5726. The leads from overnight trade were positive and, with the AUD slightly weaker, we may get a kicker heading into the weekend. NAB will be trading ex-div today but the other banks should be able to see some gains at the open.

Mixed moves in the commodities space will make it hard to pick how resource stocks will play out through the session. Gold stocks are likely to get off to a strong start though, helped by the fact the precious metal rallied to a 12-week high. ResMed endured a significant sell-off yesterday and it’ll be interesting to see if the stock can stabilise today.

STAN SHAMU Market Strategist

[Kick off your trading day with our newsletter]
More from IBT Markets:
Follow us on Facebook
Follow us on Twitter
Subscribe to get this delivered to your inbox daily