10 things you need to know before markets open in Australia and Asia

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Good morning. Here’s what’s happening as Wednesday begins and markets await US president Donald Trump’s biggest speech to date.

First, the scoreboard (8:00am AEDT):

• Dow: 20812.7 -24.7 (-0.12%)
• S&P 500: 2363.7 -6 (-0.3%)
• SPI 200 Futures (March – delayed pricing): 5,682.5 -19 (-0.33%)
• AUD/USD: 0.7667 -0.0007 (-0.1%)

And the news.

1. All eyes on Trump’s first major speech since inauguration: US president Donald Trump is set to address a joint session of Congress at 1pm AEDT. Trillions of dollars in assets spread across equities, bonds, currencies and commodities are at stake for investors betting on a pro-growth agenda, corporate tax cuts and infrastructure push.

2. Markets in risk off mode: Australian stocks are poised to tread water at open with investor appetite for risk diminish ahead of Trump’s speech. The Dow Jones Industrial Average looks set to halt its longest rally in 30 years and Treasuries advanced as a tone of caution spread through financial markets. Oil fell and gold was little changed.

3. Data today: Australia reports Q4 GDP with data expected to show the country avoided a technical recession. The economy is expected to expand 0.8% and that comes after it shrank by the most since late 2008 in the September quarter. The manufacturing index will also be released. New Zealand releases export prices and terms of trade. China has February PMIs. Japan has capital spending and manufacturing PMI. UK reports housing prices, consumer credit and mortgage approvals. US releases personal income, manufacturing index, petroleum status and construction spending.

4. Central bank speakers: Dallas Federal Reserve Bank president Robert Kaplan will discuss local and national issues and Federal Reserve Governor Lael Brainard will discuss economic outlook and monetary policy.

5. Iron ore falls on report China moving to curb speculation: Iron ore spot markets fell on Tuesday amidst reports Chinese regulators were investigating speculative trading activity in the nation’s commodity futures market. That hammered futures initially, and spot markets followed suit. According to Metal Bulletin, the spot price for benchmark 62% fines slid 1.14% to $91.27 a tonne — the fourth fall in five sessions and partially reversing the 2% gain of Monday. Despite the renewed bout of weakness, the benchmark price finished February with a gain of 9.5%, extending the gain so far in 2017 to 15.7%.


6. Aussie dollar’s mammoth day:
After days of lacklustre trade, the relative calm in the Australian dollar looks set to come to an end on Wednesday with the Trump speech and a mountain of important economic data from both home and abroad set to be released. The AUD/USD is currently trading near its session lows following remarks from San Francisco Fed president John Williams that a rate increase from the Fed is now up for “serious consideration” when the FOMC meets later this month. That’s seen the AUD/USD fall from highs of .7694 struck earlier in the session.

7. Foreigners not buying Australian bonds as they used to: Foreign holdings of Australian Commonwealth government bonds (ACGB) continued to slide in the final three months of 2016, dropping to 55% of the total outstanding stock, according to ANZ.

Source: ANZ

8. US GDP falls short: Gross domestic product has fallen short of expectations once again. The second print for US GDP growth in the fourth quarter of 2016 came in at a 1.9% annualized rate, according to the Bureau of Economic Analysis. Elsewhere, the Conference Board’s consumer confidence index surged to 114.8 in February from January’s print of 111.8, making for the best reading since July 2001.

9. JP Morgan’s perfect trading year: JP Morgan held its annual investor day yesterday, and results showed that the bank didn’t have a single day of trading losses in 2016. On average, the bank generated $80 million per day in trading income, up from $70 million in 2015. In total, the bank generated around $US21 billion in trading revenues in 2016 across fixed income and equity sales. Daniel Pinto, JP Morgan’s corporate and investment banking chief executive, said the trading returns represented the right mix of risk and caution.

10: Curtains for a big chunk of CLSA Americas: The firm is closing the research function in the US, according to a spokesman. Around 90 jobs in research and support will go as part of the change, while around 85 in other roles such as trading will not be affected. It will continue to offer execution and trading services, including: sector trading, ADR trading, portfolio trading, electronic execution and commission management, according to a statement. In addition, Asia sales and Asia trading teams located in the US will not be impacted by the changes.

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