ASX futures point to lower open Share US stocks edged higher on Tuesday, with help from Twitter and media stocks, as investors looked past a historic US-North Korea summit and focused on the Federal Reserve's policy meeting. Michael Nagle by Timothy Moore
Australian shares are poised to open lower with investors positioning for the US central bank rate decision and update outlook. ASX futures were 8 points lower at about 7.45am AEST. The Australian dollar slipped 0.5 per cent.
Market reaction to the Trump-Kim summit was muted with investors clearly preparing for what the Federal Reserve has to say about the outlook, and whether policymakers on balance see the potential for a fourth rate hike before the end of the calendar year.
US bonds were little changed after the government reported that the consumer price index rose 0.2 per cent in May from April, and 2.8 per cent from the year-ago month. Core inflation reached a 15-month high of 2.2 per cent.
"We continue to forecast that the 10-year government bond yield will rise to 3.25 per cent by the 2018, from nearly 3.0 per cent now, as an extra rise in core inflation prompts the FOMC to raise its policy rate by more than investors are anticipating in the second half of this year," Capital Economics' John Higgins said in a note. He sees the Fed lifting rates this week and twice more this year. June rotation shows investors selling banks, EM & Euro zone equities to buy defensive sectors & US equities. BAML
The latest Bank of America Merrill Lynch fund manager survey found that average cash balances edged lower and investors surveyed were now overweight US equities for the first time in 15 months. Advertisement View all announcements
"Investors have their eyes on the US this month," said Michael Hartnett, chief investment strategist, "with a record high favourable outlook for profits and a return to US equity allocation. Decoupling is back in vogue."
The survey found that 64 per cent of respondents think the US has the most favourable outlook for profits, a 17-year high; all other regions have net negative profit outlooks.
This month, the most commonly cited tail risk to the markets is a trade war (31 per cent), followed by a Fed/ECB hawkish policy mistake (26 per cent) and a Euro/EM debt crisis (23 per cent), the BAML survey found—trade tensions have been the dominant macro concern for investors in 2018.
Commodities are back in favour, with the allocation to them reaching a fresh 8-year high, the highest since April 2012 when US oil was $US105 barrel. The Longs and Shorts BAML
"Long FAANG+BAT" remains the most crowded trade identified by investors for the fifth straight month and most crowded trade outright since "Long USD" in January 2017; the top three in June are rounded out by "Short US Treasuries" (16 per cent) and "Long USD" (9 per cent), the survey found.
Expectations for faster global growth held steady, the survey also found, with just net 1 per cent of investors indicating they think the global economy will strengthen over the next 12 months, barely above the boom/bust threshold and still at their lowest level since February 2016. Today's Agenda
Local data: WBC-MI Consumer Confidence June, RBA governor Philip Lowe speaks
Capital Economics on confidence data: "We suspect that consumer confidence in Australia fell from 101.8 in May to 97.5 in June as rising petrol prices weighed on sentiment. This would further reduce the prospect of a recovery in consumer spending following the weak start to the year."
Overseas data: Euro zone industrial output April, employment first quarter; UK CPI for May; US Fed rate decision, updated forecasts and news conference by chairman Jerome Powell Market Highlights
SPI futures down 8 points or 0.1% to 6047 at about 7.45am AEST
AUD -0.5% to 75.71 US cents
On Wall St: Dow flat, S&P 500 +0.2%, Nasdaq +0.6%
In New York, BHP -1.3% Rio -0.6%
In Europe: Stoxx 50 -0.1%, FTSE -0.4%, CAC -0.4%, DAX flat
Spot gold -0.4% to $US1295.82 an ounce at 2.03pm New York time
Brent crude -0.6% to $US76.02 a barrel
US oil +0.2% to $US66.26 a barrel
Iron ore +0.8% to $US67.23 a tonne
Dalian iron ore -0.3% to 468 yuan
LME aluminium flat at $US2302 a tonne
LME copper -0.5% to $US7222 a tonne
2-year yield: US 2.54%, Australia 2.06%
5-year yield: US 2.81%, Australia 2.42%
10-year bond yield: US 2.96%, Australia 2.80% From Today's Financial Review
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