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AUD falls

AUD Falls After RBA Speech

The AUD falls to the lowest level since January 4th after the RBA speech which indicated lower than expected growth and inflation. The Aussie was off against all of the majors except for the NZD. The RBA Governor Philip Lowe recalibrated interest rate expectations.  They went from mildly hawkish to neutral due a slow down in economic activity. This is a result of the down turn in the housing market and other international uncertainty. That is despite the fact that iron ore is trading at highs and the price of oil is holding up. Both of which are major Australian commodities. Adding to the pain was a weak retail sales reading and a marked decline in imports and exports in December.

This AUD falls might have the effect of impacting inflation which would be ironic considering it was one of the RBA’s chief concerns. The depreciation in the currency will have a effect on any new imports of jigsaw mats and MMA mats. Whilst we always endeavour to keep pricing down any persistent downward trend in the value of the AUD has an impact on pricing. This is true of all products imported into Australia. Jigsaw mats are imported from China as too are MMA mats.

Market Watch

Share markets from Asia to the US slumped last week on the back of credit risk aversion and disappointing earnings. The Dow Jones lost its YTD gains in one session and the S&P 500 shed 2.3% in recording its worst week since 2012.

The ASX dropped 1.36% on Friday to close at 5556 after hitting a 6 year high earlier on in the week. UK and European shares lost ground in the wake of a lower than forecast manufacturing data reading from China.

Gold rose by 0.9% on Friday to close at $1294/oz after a disappointing jobs report from the US. More on that in the USD section below.

Oil saw its biggest weekly drop in seven months after the refinery utilisation rate dropped for the first time in 5 weeks. WTI finish 0.3% lower at $97.88/bbl.

The AUD lost close to 1% last week as economic data was softer than expected, disappointing investors after a largely positive previous week. Building Approvals dropped 5%m/m and the Producer Price Index fell 0.1%, just the second negative reading in four and a half years. This lower than expected inflation gauge opens the way for a further rate cut should Glenn Stevens deem it necessary. Retail Sales data released today ahead of the RBA meeting tomorrow should provide some interesting reading.

The price of EVA jigsaw rubber gym mats is stable. Ezymats is still the market leader both in Australia and globally though their China office.

Market Watch – Interlocking EVA Jigsaw Rubber Gym Mats

US stocks rose over the weekend, the S&P500 rising 0.30% higher to 1,936.15. The equities benchmark nearly erased its gains in the final hour of trading amidst potential uncertainty surrounding the conflict in Iraq. Islamist fighters in Iraq extended their advance, highlighting a risk to oil supply from the OPEC region and raising fears of another gulf war brewing.

Australian shares fell 0.44% on Friday, the biggest drop since the start of February following from the insurgent attacks in Iraq. This geopolitical risk added pressure to weakening spot price of iron ore and coal with the exception being energy and gold stocks which benefited from the tensions.

The spot price for gold strengthened 1.50% to $US1272.15 per ounce and the spot price for oil surged above $US114 per barrel for the first time in 9 months.

The Australian dollar is at seven month high despite geopolitical fears in Iraq. Over the past week it has been emerging as a “safe haven”. Australian dollar opened slightly lower today, pushed down by profit taking and lowering iron ore price. The dollar may see some downward pressure with the Federal Reserve policy meeting this week.

The price of EVA foam jigsaw interlocking rubber gym mats remains stable. Ezymats is a leading supplier in Australia.

Interlocking EVA Jigsaw Rubber Gym Mats

Market Watch

On Friday Market Volatility dropped to the lowest level since March 2013, when the AUD was at 1.05 against the USD. The gauge known as the VIX has retreated 47% since hitting a 14 month high in February.

US stock markets closed at a record high on Friday after a rise in new homes sales and a solid result in the Markit manufacturing purchasing managers index which increased to 56.2 in the month of May.

The Australian share market closed the week in positive territory, recovering from a mining led slump on Monday and Tuesday after iron ore dipped below $100/ton.

There is a public holiday today in the US and in the UK today which could leave the markets quite flat today.

There were some major political events over the weekend, firstly the election in Ukraine where Poroshenko has won the presidential election based on exit poll & the European parliament election was also held on Sunday. These elections did not really impact the markets.

Gold futures fell for the second time three days as a sign of recovery in the US economy curbed the demand & WTI Crude oil futures climbed to a five week high after US crude inventories tumbled.

AUD/USD faces the potential tailwind of a solid CAPEX report (Thursday) amidst a range‑trading and a heavy USD.  News of a successful “transition” in the Australian economy towards non‑mining business investment will be supportive for further gains in AUD/USD this week.  AUD crosses are likely to strengthen this week, particularly AUD/EUR, which may set a new high for the year.  The one exception to AUD cross strength isAUD/CAD, which is typically weak in May.

Jigsaw mat and gym mat futures are stable.

Market Watch

The S&P500 rallied 0.81% overnight erasing yesterday’s declines as the FOMC Meeting Minutes continued its dovish rhetoric and said continued stimulus would not risk sparking a jump in the inflation rate. Inflation is expected to remain within its 2 percent goal. Policy makers continued to say that last month the economy is showing signs of improvement and the job market is slowly picking up.

Further reduction in the monthly bond purchase program is likely to continue and they re-iterated that interest rates will remain on hold for a ‘considerable time’ once it concludes the purchase program. U.S 10-year notes yields rallied 0.85% on the back of the positive FOMC announcement, the yield gap between 5 and 30 year Treasuries widening to the highest level in a month.

Gold futures declined 0.50% as traders saw less need for the save haven metal once the FOMC announced there was no threat of inflation.

WTI crude rose to a one-month high after a government report showed that stockpiles tumbled last week as imports dropped to a 17 year low.

Market Watch

A jump in China’s iron ore demand saw a renewal of risk appetite in the financial markets. This helped ASX rise 0.8% to close at 5476, further boosted by a revenue beat and dividend upgrade from NAB. Meanwhile in Europe ECB President Draghi managed to steal the limelight from Fed Chair Janet Yellen.

Mario Draghi indicated a strong signal that the ECB possess a challenge with deflation in the Eurozone and it is prepared to act, commenting that the ECB will adopt some sort of easing measures in June. Testifying to the US Senate, Yellen largely reiterated her previous day’s messages that interest rates are unlikely begin to rise until the economic conditions in US improve further.

Overseas equity markets rallied taking a lead from the Asia on the back of better than expected Chinese Trade balance data. In Asia the Nikkei finished up 0.93% and Hang Seng was up 0.42%. At close all the stock markets in US were up except Nasdaq due to recent crash in Twitter shares.

In commodities space Ukraine tension somewhat subdued demand for gold. The yellow metal traded sideways at $1289/oz while Oil dropped 0.5% to $100.25. Copper got a boost thanks to the Chinese data and traded at $3.08/lb.

The AUD rose to a three week high as job numbers surprised the market adding 14,200 jobs in April, smashing the forecast of 8,800 jobs. The unemployment rate remained firm at 5.80%. Trade figures in China helped improve overall sentiment in the Chinese economy and this carried over to our market, pushing the Aussie Dollar higher. Chinese exports climbed 0.90% in April from last year and imports gained 0.80% leaving a trade surplus of $18.46 billion.

Soft inflations figure to keep jigsaw mats stable

The soft inflation figures release today should keep the price of jigsaw mats stable.

Consumer prices were softer-than-expected in the first three months of this year, lowering expectations that an interest rate hike could be on the cards later this year.

The headline inflation for the first-quarter of this year rose by 0.6 per cent to take the annual rate to 2.9 per cent. The figures were lower than analysts’ consensus forecasts and keeps the annual growth in inflation within the Reserve Bank’s target band of 2 to 3 per cent.

Although expectation that interest rates would be stable pushed the dollar down, it wasn’t by so much that it could push up the price of imported goods. With jigsaw mats being manufactured overseas this is a good sign.