The US stockmarket had a positive session, with better than expected industrial data from Germany boosting sentiment.
The Dow rose 0.6% to close above 15,000 for the first time, the S&P 500 rose 0.5% to a record closing high (for the fourth session in a row) and the Nasdaq edged up 0.1%.
The strength in global stockmarkets bodes well for the Aussie sharemarket today, although if trade data out of China is weaker than expected, it could dampen local sentiment.
US bond prices fell (yields edged higher) on increased supply and increased risk appetites, which saw a continued move out of government bonds and into stocks.
The Treasury sold US$32bn in three-year notes overnight.
The Aussie dollar weakened against the US dollar and the major currencies yesterday after the Reserve Bank of Australia cut official interest rates, in a move which surprised some investors.
The Aussie fell to 1.0175 US dollars following the RBA's announcement and is currently trading just above that level as investors await trade data from Australia's largest trading partner, China, later today.
The Euro gained some ground versus the Aussie dollar following the release of better than expected German data.
Commodity prices weakened amid nervousness ahead of the release of China's trade data today.
The Reserve Bank of Australia (RBA) cut the official cash rate to a record low of 2.75% at its May meeting.
It would appear that predominantly domestic factors were behind the decision to cut rates.
Lower-than-expected inflation and evidence of weakness in the domestic economy seem to be the main rationale.
Although it came as a surprise that the RBA didn't choose to take a more cautious approach in reading recent soft economic data and wait for further evidence, the pockets of weakness in the domestic economy and subdued inflation however, supported our view that there was room for one more rate cut in this cycle.
After receiving that 25 basis point cut yesterday, we expect the RBA to remain on hold in coming months, unless we are strongly persuaded by the data.
The AiG performance of construction index fell from 39.0 to 35.2 in April, the second consecutive monthly decline and the lowest in seven months.
The decline is disappointing, particularly since interest rates are low. It further raises questions as to the strength of the recovery in housing construction.
The ABS measure of house prices rose by just 0.1% in the March quarter.
It was a weak result in comparison to RP data-Rismark house prices, which rose 2.9% over the same period.
Annual growth edged up to 2.6% in the year to the March quarter from 2.5% previously.
We expect further gains in house prices this year, as lower interest rates continue to support demand.
The trade balance for March posted a surplus of $307mn, the first surplus in over a year.
Imports declined 1.1% in March, as slower growth in mining investment is lessening demand for capital imports.
Exports rose 0.6% in March reflecting a further recovery from weather disruptions earlier in the year.
Given the solid growth outlook for China and the investment boom approaching its peak, further trade surpluses in coming months seem likely.
German factory goods orders rose 2.2% in March, after gaining 2.2% in February.
These were the first back-to-back gains in a year. In March orders rose within Germany, from within the Euro area and from the rest of the world.
In Europe, there was risk-supportive EU-speak from German Finance Minister Schaeuble ("high unemployment requires action"), ECB chief Draghi ("ready to act again if needed") and Eurogroup head Dijsselbloem ("deposit guarantees will be the final building block of the banking union").
These comments suggest a tilt away from austerity policies and towards growth policies.
Private wages excluding overtime rose by 0.4% in the March quarter, close to consensus expectations for a 0.5% rise.
Annual growth was just 2.1% in the year to the March quarter, reflecting soft conditions in the NZ labour market.
The BRC shop price index slowed from 1.4% in the year to March, to 0.4% in the year to April.
This was its lowest since the end of 2009 and suggests some downside pressures on UK inflation in the high street.
The IBD-TIPP economic optimism index slipped from 46.2 to 45.1 in May, driven by weakness in the economic outlook component.
It was the second lowest reading since the end of 2011.
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