Weak iron ore prices set to put pressure on the stock market

Share Markets:

The US stockmarket edged higher on Friday night. The Dow and the S&P 500 rose 0.2% and the Nasdaq was up 0.6%.

The Australian stockmarket may come under pressure today, however, with further weakness in the iron ore price on Friday night negative for miners.

Interest Rates: 

US bond yields fell after Fed Chair Yellen's speech, which was similar in tone to the FOMC. Yellen said the Fed "may well" raise interest rates this year, and that subsequent increases will be gradual.

Foreign Exchange:

The Aussie dollar weakened against the US dollar and the other major currencies, with AUD/USD falling to 0.7733 at the time of writing, with weaker commodity prices weighing on the local currency.

AUD/NZD fell from 1.0325 to a low of 1.0204 early this morning.

The US dollar index was little changed. EUR initially dipped to 1.0801 but then bounced to 1.0949 before closing little changed at 1.0889.

USD/JPY was contained and is trading at 119.13, a similar level to Friday morning.

Commodities:

Commodity prices weakened, with the CRB commodity price index down 2.0% for the session. Concerns about a supply glut weighed on the price of iron ore, which fell 4.0% to US$53 per metric tonne - a decade-plus low.

The oil price dropped amid speculation geopolitical tensions in Yemen will not impact oil supply.

Concerns about demand from China weighed on the copper price as the supply of copper remained robust with four Chilean mines restarting after rains forced their closure.

Australia: 

There was no significant economic data released locally on Friday.

China:

People's Bank of China governor Zhou said China needs to be vigilant for signs of deflation, saying inflation was slowing a "little too quickly".

Europe:

Amid reports of accelerating deposit flight from Greek banks, there are rumours that Greece may be forced to impose capital controls. Greece and its creditors continued talks over the weekend, with Greece's reforms yet to be approved by creditors.

Japan:

Japan's jobless rate edged down from 3.6% in January to 3.5% in February.

The result was in line with expectations, but the jobs-to-applicants ratio was the highest since March 1992, indicating a high availability of jobs.

A tightening labour market gives hope that wage growth will pick up, but other data from Japan suggests that headwinds remain for its economy.

National inflation was at an annual pace of 2.2% in February. Meanwhile, core inflation, which strips out volatile items such as food and energy, was at 2.0% in the year to February.

After taking out the effects of the sales tax hike, core consumer prices were unchanged from a year ago. Falling oil prices are having a temporary downward impact on prices.

However, inflation has been well short of the BoJ's target, despite providing a significant amount of monetary stimulus.   

Retail sales grew 0.7% in February, following a flat result in January. Sales contracted 1.8% in the year to February, which was a step up from the 2.0% contraction in the previous month.

Consumer spending continues to be weighed down by the lingering impact of the sales tax hike.

Lower fuel costs and a tightening labour market however, should provide support to household spending.

United Kingdom: UK house prices decelerated from 5.7% to 5.1% annual growth in March according to the Nationwide index, compared to the 11.8% peak growth rate in the middle of 2014.

United States:

US GDP growth was unrevised at 2.2 % annualised in Q4.

The detail showed slightly stronger household services spending growth but inventories switched from a small contribution to a small drag on growth.

Net exports' drag on growth was shaved back slightly, entirely due to faster export growth.

Q1 GDP growth is likely to be slower still, due to weather disruption and ongoing sluggishness in the housing and business investment sectors.

The University of Michigan consumer sentiment index for March was revised up from 103.0 to 105.0, evenly split between current conditions and expectations.

Even so the UoM headline remains lower in March then in both January and February, largely due to the rebound in gasoline prices.
 



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