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US stocks continue to march, but us Aussies underperform… why?

Good Morning,

The S&P 500 Index rose to the highest level since July (Dow Jones +17 points), as crude settled above $US50 a barrel and the US dollar weakened to a one-month low on speculation that the Federal Reserve won't rush to raise rates amid moderate growth in the world's largest economy.

Once again, the US market continues to “outperform” us Aussies………

Why?

AUS GDP released only a few days ago showed that GDP rose 1.1% last quarter, on track for >3% annualised…

Employment growth is holding up and commodities are certainly back in favour, as the USD falls…

It is definitely a balancing act right now…

Goldman Sachs says there's a 40 per cent chance the Federal Reserve will raise interest rates in July - almost double what the bond market projects.

In Europe, The Stoxx Europe 600 Index climbed 1.1 per cent to 346.26 at the close of trading.

Germany's DAX Index was among the best performers of western-European markets after data showing a rebound in industrial production in April indicated the region's largest economy is benefiting from a pick-up in investment. The euro-area economy grew faster than previously estimated at the start of the year, according to a separate report from the European Union's statistics office.

What's on today?

Local data: Housing finance approvals; NZ manufacturing sales

NAB economists on today's local data: "Recall that in March while there was a degree of resilience shown across a number of housing indicators (e.g. auction clearance rates and prices), total finance approvals were almost unchanged, declining 0.2% m/m in March with owner-occupied loan approvals down 0.9% m/m, but investor housing approvals up 1.5% m/m, following a strong increase in February.  For investor approvals, while the trend remains soft, a degree of resilience persisted to March despite a sequence of announcements from financial institutions to tighten lending standards to some market segments. 

We also know that since March, house prices have continued to rise in April and May, May's gain likely aided by the further cut in the RBA cash rate, hints that demand has held up.  NAB forecasts that the headline number of owner-occupied approvals rose by 2.6% in April and we will also be particularly interested in investment lending approvals values that rose in March and April."

Overseas data: US MBA mortgage applications (weekly), Brazil IPCA inflation (May), Chile inflation (May), China imports, exports, trade balance (May), Japan current account (April), Japan final reading of GDP (1Q), Turkey industrial production (April), UK industrial production (April), South Africa GDP (1Q).

Overseas earnings: Dollarama, Lululemon Athletica, Dominion Diamond, Brown-Forman.

The SPI is down 16 points this morning.

 

Niv Dagan is an Executive Director of Melbourne based boutique funds management and corporate advisory firm, Peak Asset Management (www.peakassetmanagement.com.au). He is also a regular financial commentator on Sky Business.

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