Equities in the US managed to recover from the FOMC meeting minutes, with investors responding positively to some solid housing data and a sharp bounce in the Philly Fed manufacturing index. The CPI release was also interesting, coming in ahead of estimates; service prices drove the reading despite goods prices actually falling.
The acceleration in core service prices is logical given the amount of jobs the economy has been generating. Eventually, this will see wages rise as well and support inflation in the medium term, helping the Fed reach its target.
In Europe it was a different story as disappointing PMIs on the manufacturing and services fronts dragged equities lower. This will only mount pressure on the ECB to act and will also keep the single currency under pressure. There will be a couple of key speeches in Europe later today. Mario Draghi speaks at the 24th European Banking Congress tomorrow about Reshaping Europe. German Buba President Weidmann will speak about Banking Union and Regulatory Reforms.
Japan to dissolve lower house
Looking around the region, Japan dissolves its lower house today and will start gearing up for elections. This might mean we see a bit of a cautious tone today, particularly after USD/JPY retreated into the ¥118 region again, down from a high of ¥118.98. We are currently calling the Nikkei down 0.3% at 17260 and it’ll be interesting to see how it plays out as politicians are likely to start getting vocal.
Iron ore breaks losing streak
Ahead of the local market open we are calling the ASX 200 marginally firmer at 5320. Iron ore finally snapped its losing streak, which is likely to be the highlight of trade today. This could see some sort of a bounce for the pure plays in particular. Stocks such as AGO, ARI and FMG are all deep in oversold territory and a near-term bounce could take place.
Analysts are also not ruling out consolidation in the sector as declining iron ore prices pressure businesses and reduce prospects of expansion. Consolidation is likely to be the next logical step for some of these miners to survive. Outside of iron ore, Western Areas will be in focus on the back of its first quarter report.