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Morning markets: Wall St continues record run despite oil fall

Thursday, 14 Jul 2016 06:28:11 | Michael Janda And Sue Lannin

Analysts say investors now seem to be getting buying fatigue. (Chip East: Reuters)

US stocks continued to push to fresh record highs, despite a fall in the price of oil on the global supply glut.

Markets at 8:20am (AEST):

  • ASX SPI 200 futures +0.1pc at 5,357
  • AUD: 76.02 US cents, 68.5 euro cents, 57.88 British pence, $NZ1.045
  • US: Dow Jones +0.1pc at 18,372, S&P500 flat at 2,152, NASDAQ -0.3pc 5,006
  • Europe: FTSE -0.2pc 6,670, DAX -0.3pc at 9,931, Eurostoxx50 -0.3pc at 2,926
  • Commodities: Brent oil -3.9pc at $US46.54/barrel, Gold +0.1pc at $US1,344/ounce, Iron ore -0.2pc at $US58.70/tonne

After a big jump yesterday, oil prices dropped sharply to a two-month low on more supply in the US, hitting the share prices of major energy firms.

That meant overall gains were modest, but the two benchmark New York Stock Exchange indices, the S&P 500 and Dow Jones Industrial Average, still set record closes.

However, the tech-focused Nasdaq did not follow the broader benchmarks higher.

The latest Beige Book economic report by the US Federal Reserve found there were few signs of inflationary pressures.

Consumer spending was generally positive, although there were signs it was weakening.

Employment in the US continued to rise modestly with strong demand for skilled workers, according to the Fed.

European markets were disappointing, with the major bourses posting small falls or miniscule gains.

ANZ's morning market review noted that a recent rally into riskier assets with higher potential returns now looks overdone.

The risk rally appears to be sputtering out with US equities turning slightly negative, oil lower, the US dollar mixed, treasuries firmer, and gold higher.

NAB's Rodrigo Catril put the same sentiment more poetically, noting similarities between markets and The Beatles' song I'm So Tired.

In 1968 John Lennon wrote this Beatles song after three weeks of meditation with Indian Gurus, equity markets have been on a tear for four days and now in a similar way they are also showing signs of fatigue.

That mediocre trade is expected to spread to the Australian market, with futures pointing to very muted gains. 

The Australian dollar has fallen back from its overnight high against the greenback, but it still stubbornly above 76 US cents on the recent commodity market strength.

The big events today are the latest ABS employment report in Australia, and the Bank of England's interest rate decision tonight, where the BoE is expected to make a post-Brexit rate cut given its governor Mark Carney's recent comment:

In my view … the economic outlook has deteriorated and some monetary policy easing will be required over the summer.

Today's agenda:

  • Australia: Labour force data, ABS - June (11:30am)
  • Australia: New vehicle sales - Jun (11:30am)
  • UK: Bank of England interest rate decision (9:00pm)

AustraliaPlus


 

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