Morning Update – 04/07/2017 – by Arjun Lakhanpal

Morning all.. Wall St rallied but not across the board as Nasdaq seriously under-performed, suggesting an on-going rotation out of techs. S&P closed up 0.23% but Nasdaq was down o.5%. This pressed on Asian stocks somewhat and the firing of another missile by N. Korea unnerved Asian markets and the Nikkei ended lower by 0.18%. HK was down 1.5%. Trump tweeted that China may ‘put a heavy move on North Korean and end this nonsense once and for all’ about the missile launch increasing tensions between the three countries. In FX it was the AUD that was the main currency in focus overnight; it was up 0.2% ahead of the RBA decision however dropped -0.7% immediately after the RBA decided to leave rates unchanged. The comments from the RBA were not as hawkish as the market would have hoped, stating that an appreciation in AUD would complicate economic adjustment and that at current economic growth inflation is expected to increase gradually without changing policies. JPY made the biggest gains, 0.2% stronger vs the USD. The USD index was 0.1% weaker compared to yesterday’s 0.6% gains from the night before. The US yield curve continues to flatten with a 4.6bps increase in yields to 2.350% overnight for the US 10Y but this may actually weigh on the USD. A US Holiday today but we could still see some action as The Riksbank are expected to keep rates the same at their central bank meeting today at 8:30am, the markets will be looking out for any comments that the Riksbank will be following suit to the ECB, though highly unlikely as a forecast for a rise isn’t expected until 2019. The tone of the statement may well be key. On the EUR, Sources said some ECB members are having doubts about signalling they are getting closer to scaling back easy monetary policy in July; ECB might remove part of easing bias, leaving a reference to size or duration of QE. Also this morning we get UK Construction PMI and EU PPI. We also get some ECB speakers through the day. Good luck..