Have you ever experienced a budget that has created such a visceral reaction in such a short space of time.
In my more than 25 years in markets I can’t think of one time when the budget and the government has been so roundly criticised by almost all quarters and abandoned by voters as polls released this morning show.
Regardless of the fact that Prime Minister Abbott says that the minor parties must respect his election victory the reality is that that was in the House of Reps while in the Senate the minor parties, with whom the government must negotiate the Budget’s passage, can rightly say that they were put there for a reason.
So while the Australian Federal Budget is hardly ever market moving budgetary impasses have on one or two occasion been very important for the Aussie dollar and bonds.
Key here is both the US dollar impact over the next few weeks but also whether the Aussie upside momentum is fading – as it appears to be.
Levels to watch are 0.9348 and 0.9308. So lets give it a bit of room and say a move under 0.9287 opens up a decent fall toward the 0.9150/70 region.
Turning back to Friday now and it was a better close to the week for US stocks after housing starts (+13.2%) and building permits (+8%) rose strongly in April. These data are important because just 2 weeks ago Fed Chair Janet Yellen voiced her concerns about the slowing housing market so this should assuage those concerns.
In the end the Dow rose 0.27% to 16,491, the Nasdaq was 0.53% higher at 4,091 and the S&P climbed 7 points to 1,878 for a gain of 0.38%. us Treasuries were a little higher with 10’s finishing at 2.52% which helped the dollar a little.
In Europe shares were higher everywhere except Germany with Spanish and Italian stocks leading the way with increases of 1.10% and 1.12% respectively. In the UK the FTSE rose 0.22% to 6,856, the CAC rose 0.25% to 4,456 while the DAX in Germany fell 0.28% to 9,689.
The impact on local markets has been an increase of 7 points in overnight trade but the budget malaise that it seems is about to hit the Australian economy could turn stocks lower today as might the move in Iron Ore prices. At the close on Saturday morning the June SPI 200 finished up 7 at 5497 bid.
On currency markets as noted above the Aussie is holding in at 0.9366. The Euro slipped back below 1.37 and sits at 1.3695 this morning. The Pounds recovery off the trend line support continued and it sits at 1.6816 while USDJPY still languishes around 101.50.
Gold is back below $1300 at $1,296 oz, silver is trading at $19.31 oz while Nymex crude for may expiry is at $102.51. On the Ags it was a relatively quiet night and copper sits at $3.16 lb this morning.
On the data front there is nothing of note in Australia, and only machinery orders in japan while unemployment is released in Hong Kong. Tonight is also quiet with just EU construction data.