Inflation Miss Rocks Australian Markets, Boosting Rate Cut Bets
- Trimmed mean gauge rose 0.3%, missing the 0.4% expected
- Miss increases pressure on RBA to cut rates from 1.5%
Australia’s dollar fell, while stocks and bonds rallied as inflation data missed estimates to further fuel speculation of an interest-rate cut by the central bank.
The Aussie dropped as much as 0.9 percent, the most in a month, to 70.36 U.S. cents. Yields on the three-year bond slid 14 basis points to a record 1.29 percent. Australia’s stock benchmark extended its gain, rising as much as 1.1 percent to it highest in more than 11 years.
“Given the importance of the CPI data to the RBA and their recent comments on inflation, we will see further pressure on the Aussie over the next few sessions,” said Nick Twidale, chief operating officer at Rakuten Securities Australia Pty. London traders may continue selling the Aussie below 70 U.S. cents, he said.
The inflation data miss, with first-quarter prices stagnant, adds to other signs of a slowing economy that has been sapped by a property market slowdown and the U.S.-China trade war. Speculation the Reserve Bank of Australia will cut rates has increased since February when influential Westpac Banking Corp. Chief Economist Bill Evans made the forecasts for lower interest costs.
The trimmed mean gauge, a key core inflation measure, rose 0.3 percent in the first quarter from the prior three months, missing the 0.4 percent predicted by economists. Headline inflation was flat, compared with the 0.2 percent estimates.
“The inflation numbers will now increase the pressure on the RBA to consider cutting interest rates from 1.50 percent given the central bank is a formal inflation targeter,” said Mansoor Mohi-uddin, head of currency strategy at NatWest Markets.
Bulls preferred greenback, oil while Loonie stood on the other end
- Return of global traders fuelled greenback and oil.
- Canadian Dollar (CAD) remained nervous ahead of the BOC.
- Australia’s CPI and the BOC are in the spotlight from economic calendar whereas Brexit may keep dominating news headlines.
With the presence of all the major global markets on the floor, Tuesday turned out as an active trading day.
Investors preferred the US Dollar (USD) and the oil among other avenues while equities also surged. However, the Canadian Dollar (CAD), generally known as the Loonie, became the biggest loser among G10 currencies.
Risk-off, previous bias on upbeat fundamentals and a welcome run of the equities could be termed as catalysts that helped the greenback became market favorite.
Brexit remained as a factor challenging market’s risk sentiment while geopolitical tensions surrounding North Korea, Iran and Libya added volume into the pessimism.
Crude oil rose to the highest since October 31 after the Organization of the Petroleum Exporting Countries (OPEC) showed concern for Iran sanctions from the US. It should also be noted that an increase in API inventories got little attention from energy traders.
The Canadian Dollar (CAD) failed to enjoy crude’s up-moves as Loonie traders remained cautious ahead of the Bank of Canada’s (BOC) monetary policy meeting later today.
Global equity traders cheered the return of major market-players as upbeat earnings from Twitter, Coca Cola and European health care stocks fuelled investor optimism. S&P 500 crossed the all-time high as it registered 0.9% gains to 2,934 whereas DJIA also secured more than half a percent gain to close around 26,656.
Despite rising equities, risk-tone remained suppressed as the US 10-year treasury yield dropped nearly two basis points to 2.57% at the end of Tuesday.
Looking forward, Australia’s first quarter inflation numbers will offer an active start to the Wednesday’s trading followed by German IFO numbers and BOC meeting. While Aussie CPI could become another reason for antipodeans to extend their recent slid, the expectedly soft outcome from German figures and the BOC might continue pushing investors towards the USD.
Stock Market News
U.S. stocks higher at close of trade; Dow Jones Industrial Average up 0.55%
U.S. stocks were higher after the close on Tuesday, as gains in the Healthcare, Technology and Consumer Services sectors led shares higher.
At the close in NYSE, the Dow Jones Industrial Average rose 0.55% to hit a new 6-months high, while the S&P 500 index gained 0.88%, and the NASDAQ Composite index climbed 1.32%.
The best performers of the session on the Dow Jones Industrial Average were United Technologies Corporation (NYSE:UTX), which rose 2.27% or 3.11 points to trade at 140.02 at the close. Meanwhile, Coca-Cola Company (NYSE:KO) added 1.71% or 0.81 points to end at 48.21 and Merck & Company Inc (NYSE:MRK) was up 1.55% or 1.14 points to 74.60 in late trade.
The worst performers of the session were Procter & Gamble Company (NYSE:PG), which fell 2.69% or 2.85 points to trade at 103.16 at the close. Verizon Communications Inc (NYSE:VZ) declined 2.09% or 1.22 points to end at 57.15 and Walgreens Boots Alliance Inc (NASDAQ:WBA) was down 1.63% or 0.88 points to 53.22.
The top performers on the S&P 500 were Hasbro Inc (NASDAQ:HAS) which rose 14.23% to 100.65, Kohls Corp (NYSE:KSS) which was up 11.91% to settle at 75.48 and Quest Diagnostics Incorporated (NYSE:DGX) which gained 9.27% to close at 93.08.
The worst performers were Waters Corporation (NYSE:WAT) which was down 12.31% to 211.36 in late trade, State Street Corp (NYSE:STT) which lost 4.35% to settle at 66.86 and Albemarle Corp (NYSE:ALB) which was down 3.80% to 79.05 at the close.
The top performers on the NASDAQ Composite were Silver Run Acquisition Corporation II (NASDAQ:AMR) which rose 30.15% to 0.23, Synthesis Energy Systems Inc (NASDAQ:SES) which was up 28.60% to settle at 0.5400 and Atossa Genetics Inc (NASDAQ:ATOS) which gained 22.97% to close at 3.4800.
The worst performers were Moleculin Biotech Inc (NASDAQ:MBRX) which was down 46.64% to 1.59 in late trade, Presbia PLC (NASDAQ:LENS) which lost 39.78% to settle at 0.330 and Astec Industries Inc (NASDAQ:ASTE) which was down 26.00% to 31.59 at the close.
Rising stocks outnumbered declining ones on the New York Stock Exchange by 2189 to 788 and 106 ended unchanged; on the Nasdaq Stock Exchange, 1958 rose and 706 declined, while 67 ended unchanged.
EBay raises forecast as redesign draws customers, boosts ad revenue
EBay Inc raised its full-year sales and profit forecasts on Tuesday, as user-friendly changes to its ecommerce platforms attracted more customers and also increased its advertising revenue.
The company, facing intense competition from Amazon.com Inc and Walmart Inc, has focused on its promoted listings program and payments business, as well as worked to make its platform simpler to use through the introduction of grouped listings and personal recommendations.
More than 800,000 active sellers took advantage of the promoted listings in the first quarter, helping more than double advertising revenue to over $65 million, the company said.
Chief Executive Officer Devin Wenig on a post-earnings call reiterated that the company was reducing third-party ads that are not accretive and remained on track toward a $1 billion advertising revenue opportunity.
The results come as eBay is in the middle of a review of its StubHub and eBay Classifieds businesses following activist investor pressure.
The San Jose, California-based company has also agreed to appoint two new directors to its board as part of an agreement with activist investors Starboard Value and Elliott Management.
“We see the beat and raise as a positive reflection of management’s efforts, prior to the involvement of the activist, to improve its operating results – including expanding its efforts in advertising and payments,” said Tom Forte, an analyst with D.A. Davidson.
EBay’s shares rose 5 percent in extended trading after the company also beat first-quarter revenue and profit estimates.
The company raised its full-year revenue forecast to range between $10.83 billion and $10.93 billion, and its profit to be between $2.64 per share and $2.70 per share.
Net revenue rose 2.4 percent to $2.64 billion in the first quarter ended March 31, beating analysts’ average estimate of $2.58 billion, according to IBES data from Refinitiv.
EBay said active buyers grew 4 percent to 180 million in the reported quarter. However, the company’s gross merchandise volume, which is the value of goods sold on its websites within a certain time frame, fell 4.2 percent to $22.59 billion.
Excluding items, eBay earned 67 cents per share, beating estimates of 63 cents per share.
Crypto Mixed; Japan’s SoftBank Founder Lost $130 Million on Bitcoin
Bitcoin held its grip above $5,500 on Tuesday morning in Asia while other major cryptocurrencies traded lower without a clear directional mover.
Bitcoin continued to gain momentum to rise 3.09% to $5,523.3 by 12:12 AM ET (04:12 GMT). Over the past seven days it has added 6.42%, outperforming the other major digital tokens.
However, Ethereum slid 1.47% to $168.22, XRP shed 1.70% to $0.31779 and Litecoin lost 5.61% to $72.456.
The crypto market cap remained at $181 billion.
Japanese telecom giant SoftBank’s founder Masayoshi Son reportedly lost over $130 million with his Bitcoin investment, according to The Wall Street Journal. The report garnered some attention among crypto traders.
The report said that Son bought the digital coin in late 2017 when it reached an all-time high at $20,000. He lost a fortune when he sold the coin in early 2018 after the price plummeted.
The report also suggested that Son decided to invest in Bitcoin at the recommendation of Peter Briger, the co-chairman of asset management company Fortress Investment Group.
SoftBank is actively exploring the potential of the technology that underpins cryptocurrencies. Last September, the company was reportedly developing a blockchain-powered cross-carrier mobile payments service.
In other news, an analyst at StrongMarket who tweets under the handle Cryptopolis said that Nasdaq is testing trading of a Bitcoin-based product. Even though Nasdaq has not made any official statement yet, the news caught a lot of attention among crypto investors on Tuesday morning.
In a tweet, the analyst said he bought one Bitcoin on retail brokerage firm TD Ameritrade. The digital coin was found trading against the U.S. dollar under the unknown symbol “CXERX,” which is purportedly listed on the Nasdaq. He also claimed that the BTC/USD pair was launched on April 10, 2019.
Nasdaq has been tapping into the crypto space. In late 2018, it reportedly confirmed its plans to launch Bitcoin futures in the first half of 2019. In February, it started listing two crypto price indices from U.S. blockchain and crypto market data company Brave New Coin, namely Bitcoin Liquid Index and Ethereum Liquid Index.
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