Good morning. Here’s what’s happening as Wednesday begins and the idea of naming China a currency manipulator is picking up steam on both sides of US politics.
First, the scoreboard (8:05am AEDT):
• Dow: 20734 +114 (+0.6%)
• S&P 500: 2364 +12 (+0.5%)
• SPI 200 Futures (March – delayed pricing): 5,769 +18 (+0.3%)
• AUD/USD: 0.7681 -0.0007 (-0.09%)
And the news…
1. Stocks poised to open higher: Australian stocks will take cues from Wall Street where US equities scaled another record after results from retailers including Wal-Mart added to economic confidence. Philadelphia Fed President Patrick Harker, who votes on policy this year, said a US interest rate move next month is not “off the table at this point.” Oil advanced, and gold declined.
2. Data today: The biggie is Australia wage price index. The previous reading was a record low. Australia also has data on construction work. China reports house price data for January. Europe reports inflation. UK has economic growth and business investment. In the US, we get Fed minutes, existing home sales, and mortgage applications.
3. Central bankers out there: Reserve Bank of Australia Governor Philip Lowe speaks on Australia and Canada – shared experiences in Sydney. Federal Reserve governor Jerome Powell discusses economic outlook and monetary policy
4. Company news: Another mammoth earnings day led by Woolworths and Fortescue. Others include Bellamys, Fairfax, and Woodside Petroleum. HP, Eaton Vance are among US majors to release results. Lloyds Banking Group, Bayer and Mitsui Sumitomo Insurance also post earnings.
5. The Aussie: The battler endured a topsy-turvy session on Tuesday, sliding lower in Asia and Europe only to recover almost all of the losses in the latter parts of trade. The moves in the Aussie were largely driven by those in the US dollar. US bond yields initially lifted, helping to bolster the US dollar, following continued speculation that the US Federal Reserve could hike interest rates again as soon as March. However, those moves were largely unwound in the second half of the session, coinciding with the release of US services and manufacturing PMI reports for February that undershot expectations. As a result, the AUD/USD is almost back to where it began the session. It also made solid ground against the Japanese yen and euro, reflective of the risk-on mood across broader financial markets overnight.
6. Iron ore goes nuts: Iron ore spot markets surged to yet another multi-year high. With Chinese futures down overnight, the run towards the $100 a tonne level looks like it may have stalled for the moment. According to Metal Bulletin, the spot price for benchmark 62% fines jumped by a further 2.73% to $94.86 a tonne, leaving it at the highest level since August 11, 2014. It has now gained 20.3% in 2017, after a 81% surge in 2016. And it’s now risen close to 150% from the lows struck in early December 2015. BHP Billton, which reported a surge in half-year profit Tuesday. warned that iron price would come under pressure in the short term from moderating Chinese steel demand growth, high port inventories and rising low cost supply.
7. Mining profits are back, BHP Billiton shows: After the bell in Sydney Tuesday BHP Billiton’s underscored the boom and bust cycle of mining profits and commodity prices. The world’s largest miner reported a seven-fold surge in profits. It lifted dividends and slashed debt.
8. Stocks priciest in 13 years: FactSet says the S&P 500’s 12-month forward price to earnings ratio — which takes analysts’ future projections for S&P earnings and the current price of the index — sits at 17.6x, the highest level since June 23, 2004. Additionally, the forward P/E is now higher than many historical averages. The current forward 12-month P/E ratio of 17.6 is now above the four most recent historical averages: 5-year (15.2), 10-year (14.4), 15-year (15.2), and 20-year (17.2), according to Factset.
9. Sage words from the Bank of England: One of the Bank of England’s most senior policymakers has acknowledged that the central bank is unlikely to predict the next financial crisis or even the next recession in the UK because economic models are simply not good enough.Speaking to the House of Commons’ Treasury Select Committee (TSC) on Tuesday, Monetary Policy Committee member Gertjan Vlieghe told MPs: “We are probably not going to forecast the next financial crisis, nor are we going to forecast the next recession. Models are just not that good.”
10. Oh, Snap: Snapchat executives in New York on Tuesday were peppered with questions about competition from Facebook, user growth for the disappearing-message app, and accessibility in less developed markets as they pitched investors on the company’s shares. Snap Inc., as Snapchat’s parent company is known, is looking to raise as much as $US3.2 billion in a much-anticipated initial public offering and executives are travelling from London to San Francisco as they try and drum up interest in the sale. Giving the sale process a shot in the arm Goldman Sachs thinks Snap’s revenue will grow 5x.
Your mid-week bonuses.
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