Canada's re-entry into oil market set to edge price lower

Share Markets:

US share markets were mostly weaker with the S&P500 down 0.2% and the Nasdaq down 0.1%.  The Dow was flat.

Weaker energy prices held the market back. European markets also fell overnight as chemical and oil companies slipped back. The FSE100 fell 0.3%, the Dax was down 0.7% and the Euro Stoxx fell 1.0%.

Interest Rates:

US 10 year government bond yields ranged between 1.82% and 1.87%, while 2 year yields rose from 0.87% to 0.90%. The chances of a June Fed rate hike were increased to slightly over 30%, while a hike by year-end is now fully priced in.

FOMC member Williams repeated that two or three hikes this year seems appropriate, while Bullard thought the data had been mixed: strong labour but sub-trend growth.

Foreign Exchange:

The US dollar index began the session strongly but faded in the second half for little net change. The yen lifted against the USD while the AUD was initially weaker as energy and iron ore prices declined but regained lost ground later in the session.

Commodities:

The price of oil edged lower as Canadian oil-sands producers prepared to resume production.

Gold was lower as the probability of a 2016 Fed hike lifted while copper fell for a fourth straight day as was weaker Chinese imports raised concerns about demand out of China.

The price of iron ore was also lower at $US51.22 per tonne.

Australia:

No major data released. The next economic major statistics will be private capital spending numbers on Wednesday.

These will indicate whether or not non-mining investment has picked up as well as the extent of the ongoing decline in resource related investment. It will also give markets the latest reading on business investment intentions for 2016-17.

Europe:

The Conference Board measure of consumer confidence improved from -9.3 to -7.0 in April.

The Markit Eurozone manufacturing PMI in May slipped from 51.7 to 51.5 while its services equivalent remained steady at 53.1. As a result, the composite index fell from 53.0 to 52.9 suggesting ongoing modest expansion in Europe.

Japan:

The Nikkei manufacturing PMI slipped to a reading of 47.6 in May, from 48.2 in April. It was the lowest reading since December 2012. The reading is further below 50 indicating manufacturing activity in Japan contracted more rapidly in May.

The Japanese trade surplus widened to ¥823.5bn in April, from ¥754.2bn in March. This was the highest trade surplus since March 2010. Imports declined 23.3% in the year to April. Yen strength is weighing on exports.  Exports fell 10.1% in the year to April.

United States:

The US Markit manufacturing PMI slipped from 50.8 to 50.5. It was forecast to rise to 51.0. This is its lowest level since September 2009.



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