Good morning. Here’s what’s happening as Wednesday begins.
First, the scoreboard (7:50am AEDT):
• Dow: 20494 +82 (+0.4%)
• S&P 500: 2334 +8 (+0.4%)
• SPI 200 Futures (March): 5,728 -2 (-0.03%)
• AUD/USD: 0.7653 +0.0017 (+0.2%)
And the news.
1. Yellen boost for markets: Australian stocks could open higher tracking US stocks that scaled a fresh record high though weaker iron ore prices may weigh on miners. The dollar rose after US Federal Reserve chair Janet Yellen said gains in consumer spending, household income and American wealth are sustaining economic growth that may lead to higher interest rates. Treasuries dropped.
2. Fed can’t wait too long: Yellen said the central bank can continue to raise interest rates slowly although it would be “unwise” to wait too long. “As I noted on previous occasions, waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession,” she said. An Obamacare repeal could have “a significant impact on spending” and the US economy and Trump’s immigration curbs may slow growth, she said.
3. Data today: Australia will have new vehicle sales and consumer confidence. UK releases jobs data and US has inflation, retail sales and industrial production data.
4. Central bank speak: Alexandra Heath, Head of Economic Analysis at the Reserve Bank of Australia speaks at a conference in Sydney. US Federal Reserve chair Janet Yellen will give her semiannual monetary policy testimony before the House Financial Services Committee. Other Fed speakers during the day include Boston Federal Reserve Bank President Eric Rosengren, Philadelphia Federal Reserve President Patrick Harker and New York Federal Reserve Bank President William Dudley.
5. Company news: It is a mega earnings day in Australia led by the nation’s biggest Commonwealth Bank of Australia. Others include Wesfarmers, Dexus, CSL and Dominoes. CBA posted a 2% increase in cash profit to $4.9 billion to hit another record high. And China is still booming for a2 milk. The company posted a profit of $NZ39.4 million ($37 million) in the six months ended December 31, up a whopping 290% from a year earlier.
6: Iron ore slips: Iron ore spot markets slipped on Tuesday, pausing for breath after a breakneck rally over the past week. And with Chinese futures down overnight, it suggests the weakness may extend into a second session. According to Metal Bulletin, the spot price for benchmark 62% fines fell 0.56% to $91.71 a tonne, marking the first decline in six trading sessions.
7. Aussie dollar: The Australian dollar just can’t break the 77 cent level at present, coming within a whisker overnight before tumbling lower on the back of renewed US dollar strength. while the Aussie has gone almost nowhere against the US dollar over the session, it has actually outperformed by some margin against the crosses, benefiting from a strong NAB Australian business confidence survey and acceleration in Chinese inflationary pressures seen in data released on Tuesday.
8. Deutsche Bank’s pound warning: The pound’s post-Brexit vote downturn is nowhere near done yet, and the UK’s currency could fall by as much as 16% more, according to one of Deutsche Bank’s most senior staff dealing with foreign exchange. And a Bank of America Merrill Lynch Global Fund Manager Survey says a higher percentage of investors in February believed the dollar is overvalued than in more than a decade.
9. Banks: In bank news, Credit Suisse posted a loss of 2.35 billion Swiss francs ($3 billion) for the last three months of 2016. And Goldman Sachs is using technology to improve M&A deals — but it’s making some bankers “uneasy”.
10.Deals: GM is in talks to sell its European business, and Aetna and Humana have called off their $US34 billion merger.
Here’s a mid week bonus: Swiss watchmaker Vacheron Constantin is trying to win millennials by selling $US45,000 watches online and these are the watches worn by some of the most powerful men in finance.
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