Economic & Market Commentary

Market Insights

Forget the war of words taking placing over North Korea, eyes are turning to the crisis unfolding in Venezuela. That includes the eyes of President Trump who it seems wouldn’t rule out military intervention. This comes despite the US skipping the recent Lima meeting between 12 countries from the American continents, which gave the market the impression the US would take a back seat when it came to sorting out the issue.
Venezuela is a country rich in oil which exports mainly to the US. Any disruption to that supply will prompt the price of oil to rally globally and affect the share price of energy companies.

The Australian dollar’s (AUD) strong rally in recent weeks has caught the market by surprise and signs show that it could push higher – possibly even hitting US$0.85. That’s a big jump compared to US$0.80 today and just US$0.74 back at the start of June.
The strength of the currency reflects a few main factors:

US and global stocks are trading at record highs as markets continue to climb a wall of worry. Also volatility continues to fall rapidly and the VIX (Chicago Board Options Exchange Volatility Index) is back to the near-low levels it reached a few months ago. Of course, whilst investment sentiment is improving, it is nowhere near euphoric.
Markets will keep a close eye on the US Senate this week to see whether it passes the new US healthcare bill. Getting this bill through the senate is a test case for the Trump administration. If the Republicans are successful in winding back Obamacare, they will have a greater chance of getting their next major initiative – tax reform – passed.

Instreet Market & Economic Commentary

Instreet Market & Economic Commentary and Opinion

The growing acceptance of China in international capital markets faces a watershed moment this coming week with a decision due out on whether a batch of stocks listed on its $7 trillion domestic equity market will be included in the world's dominant emerging markets stock index – MSCI.

Instreet Market & Economic Commentary & Opinion

Popular opinion may be on a downer, but equity markets continue to rise with the US, Germany and the UK all reaching record highs last week. Even Japan closed out above 20,000, which hasn’t been seen since Dec 2015.

Instreet Market & Economic Commentary & Opinion

Offshore equity markets have recovered quickly since last Wednesday’s sell-off which was prompted by growing fears that US President Trump would be impeached. Markets aren’t concerned with the impeachment itself, but rather what would happen to the re-inflation policy if Trump wasn’t President anymore.

The Aussie dollar is likely to remain under pressure for the time being as commodity prices continue to fall and Australia’s interest rate premium narrows.
The price of Australia’s main commodity exports (namely iron ore and coal) have a strong influence on the value of the Australian dollar. Recently, iron ore prices have fallen to about US$65 a tonne – a big drop compared to the US$90 a tonne they reached late last year and earlier this year.
Even when pricing hit US$90, the Australian dollar didn’t get much above US$0.75. This doesn’t paint a strengthening outlook for the Australian Dollar in the current environment.

After a nail-biting campaign, the first-round of voting in the French Presidential election took place over the weekend with centrist Emmanuel Macron and euro-sceptic Marine Le Pen winning the most votes. The outcome stunned the established political parties which have no candidates running for the second round of voting (due to take place on May 7). The French people will now be choosing between two radically different visions for the country.
If Macron wins, he will be the first independent President of the 5th Republic in France. This would delight France’s EU partners and reassure investors. Indeed, the Euro initial response was to rise 2% to €1.0935 against the dollar— a five-month high.

Instreet Market & Economic Insights

Investors took to safe assets last week in response to the US missile strikes on a Syrian air base. It was a predictable response, with the Japanese Yen, gold, and highly-rated government bonds initially rallying as stock markets dropped.