US equity markets suffered another uphill battle overnight as better than expected corporate earnings from US retailers failed to negate mediocre economic news and the never-ending story of Europe’s economic hardships. In economic news, US new housing starts surpassed expectations growing at an annual rate of 672,000 in April, against a previous upward revision of 635,000. Economists had expected a more subdued rise of 650,000 new starts. However building permits fell 11.5 percent in April to record annual growth of 606,000 against expectations of a rise of 680,000 new building permits. Wholesale inflation numbers (PPI) also fell 0.1% in April after rising 0.7% in March.
‘This could be the start of something big’ has been the general consensus amongst global markets as investors ponder the potential contagion of Europe’s economic woes. Overnight, fears heightened evident in the downward trajectory of the EURO which slumped to fresh four years lows of 1.2160 against the greenback.
This only meant one direction for the Aussie dollar, which fell through 87 US cents with ease, to near 4 month lows of 86 US cents. At the time of writing the Aussie dollar is buying 86.1 US cents. Yesterday’s minutes also failed to present any upside for the Aussie dollar, with the minutes confirming economist’s consensus the RBA will hold the benchmark interest rate steady in June. The minutes stated the Australian economy is now “well placed”, when deciding to lift interest rates to 4.5 percent earlier this month for the sixth time in seven meetings.