Good morning. Here’s what’s happening as Wednesday begins.
First, the scoreboard (7:50am AEDT):
• Dow: 19,856 -115 (-0.6%)
• S&P 500: 2278 -3 (-0.2%)
• SPI 200 Futures (March): 5,576 -21 (-0.4%)
• AUD/USD: 0.7586 +0.0031 (+0.4%)
And the news:
1. Trump trade fades: US stocks are set to decline for the fourth day and the greenback had its worst monthly decline since March after Donald Trump’s trade adviser called the euro “undervalued” and the US president said China and Japan plan their money markets. Australian stocks could draw support from the rebound in base metals such as copper, aluminium and zinc.
2. Data today: Australia’s PMIs, CoreLogic house price index and cost of living index are due. China has PMIs too, while UK releases house prices and employment cost. US has auto sales, ISM manufacturing index and construction spending.
3. Companies in focus: Auckland International Airport posts a traffic update. In the US, Facebook and Legg Mason are among those reporting earnings.
4. Australian dollar: The Australian dollar ripped higher overnight, hitting a high of .7605 against the US dollar before easing in recent trade. However the Aussie actually underperformed by some margin against the major crosses.
5: Iron ore is quiet: Activity is not exactly humming in iron ore spot markets right now. This table from Metal Bulletin, showing price movements across various grades on Tuesday, tells the story:
6. Unaffordable Australian houses: As if it wasn’t unaffordable enough. The nation’s largest bank says housing affordability is set to worsen.
7. People turning to gold: The rise of Donald Trump, Brexit and political shocks has driven demand for gold bullion from the “person in the street,” the chief of the UK’s Royal Mint said. Gold broke above the US$1,200 in trading on Tuesday, spurred on by Trump’s volatile first 10 days in power, which culminated in the firing of acting US attorney general Sally Yates after she defied him on his controversial executive order on immigrants and refugees.
8. Trump’s clumsiness makes the Fed’s job easier: The case for interest rate hikes, given inflation that is persistently below target and a job market that everyone knows could still use some improvement, was already weak. Now, with a US president whose own erratic behaviour and wayward tweets may themselves be the biggest threat to stability, the argument for standing pat seems open and shut.
9. Long term bond bear market: The US may be entering a long term bear market for bonds — here’s what that looks like, according to Charles Schwab.
10. Tesla shorted: Short sellers are setting their sights on Tesla. Data compiled by S3 Partners shows short interest now makes up more than 35% of the float, or shares available to the public, and that it would take 8.23 days for shorts to cover those positions.
And here’s a mid-week bonus. “It’s all mental with him”: Warren Buffett’s late wife revealed why it took the billionaire so many years to start giving away his fortune.