The Overnight Report: Waiting

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By Greg Peel

The Dow closed down 48 points or 0.3% while the S&P fell 0.2% to 2085 and the Nasdaq lost 0.2%.

Waiting

What can I say?

The local market was up and down yesterday before closing flat. Volumes were minimal.

Sector moves were also evenly spread across ups and downs and all were relatively benign. The biggest move was in consumer staples, which fell 0.9% following Wesfarmers' ((WES)) investor day.

And still we wait.

The most notable move on the day was in the Aussie, which is up 0.9% at US$0.7523. No doubt the RBA is frustrated. But currency moves across the globe this week have little to do with anything other than Brexit posturing. Safe havens are the popular parking spaces.

It is assumed a “go” vote in Britain would send the pound crashing, and the US dollar rising not just on the cross-rate, but as a global safe haven. The Aussie is also a popular safe haven at times of anxiety as long as commodity prices aren’t also crashing. A Brexit would send the AUD-GBP flying but the “Aussie”, being the AUD-USD, would likely fall on USD strength.

Conversely, were the Brexit to be defeated, the pound would not crash, nor probably rise too much given it is already leaning to the “stay” side. Presumably the Aussie would go back to pricing in the local economy, vis a vis the US.

But I could talk about this all day, and neither you nor I would be any the wiser.

Waiting

The US dollar index is down this morning, by 0.5% to 93.57, helping the Aussie higher. It was up by the same amount yesterday, and down by the same amount the day before.

The US dollar index is really not telling us anything, other than the polls are fluctuating. European stock markets closed modestly higher again last night, but after the close in Europe a new poll was released showing “go” ahead by a point. The bookies are still favouring “stay” nonetheless.

All we can reliably conclude is that the vote will go down to the wire, and will be determined by the one consistent cohort in every poll to date – the 10% undecided.

The Dow opened higher on the session last night before drifting to a lesser close. Volumes were minimal.

Janet Yellen testified before the House financial committee last night. Her Tuesday night testimony before the Senate banking committee focused on global risks, with Brexit being front and centre, whereas last night she concentrated on domestic issues, suggesting she was hopeful the US economy will have picked up in the June quarter.

No one paid much attention.

US existing home sales rose 1.8% in May to the highest level in almost ten years.

No one paid much attention.

The first regional results of the Brexit referendum are expected around 12.30am London time, which is 9.30am tomorrow morning Sydney time. If the outcome is a coin toss as the polls are suggesting, it may be several hours before a result is known.

Commodities

Weekly US inventory data had West Texas crude down US85c last night to US$49.00/bbl on the new August delivery front month.

The weaker greenback helped sustain base metal prices, but all gains were less than one percent.

Iron ore rose US$1.00 to US$51.70/t.

Gold is steady at US$1265.90/oz.

Today

The SPI Overnight closed down 16 points.

Japan, the eurozone and US will all provide flash estimates of June manufacturing PMIs over the next 24 hours.

Locally, June stock options expire on the ASX but little volatility is expected at this time.

One more sleep.

Rudi will make his weekly appearance on Sky Business today, 12.30-2.30pm.
 

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